Reverse mechanicism in service tax

Queries 576 views 2 replies

shrigopal

managing director

44 Points Joined February 2010

WE ARE MANUFACTURING P.LTD CO., DURING CONSTRUCTION OF OUR NEW UNIT WE PAID RS. 325000.00 IN 2012-13 AND 725000.00 IN THIS FIN YEAR FOR HIS INVOICES AS LABOUR CHARGES. CONTRACTOR IS NEITHER REGISTRERED WITH SER TAX NOR HE CHARGED SERVICE TAX IN INVOICES. BUT WE HAVE DEDUCTED TDS @ 1% ON THAT AMOUNT.WE ARE TOLD BY HIM THAT HIS TURNOVER IS LESS THAN 9.00 LAC PER YEAR .WILL IT COME IN PRIVIEW OF REVERSE CHARGE MECHANSIM OF SERVICE TAX AND ARE WE ABLE TO PAY SERVICE TAX ,IF YES.. WHAT AMOUNT. PLEASE GUIDE US....

Replies (2)

CA and CMA Ravinder Singh

CA and CMA

853 Points Joined January 2010

labour charges dont come under the purview of reverse charge mechanism of service tax. you dont need to pay any service tax not charged by the contractor. your liability is just to deduct tds at appropriate rate which you have done.

Guest

Dear friend Its labour charges through contractor, so here is no question about labour charges it is the service which was provided by the contractor to you and you have to pay service tax if you are a body corporate(as per reverse charge mechanicism) as manpower supply service and responsibility is receiver 75% and provider 0 % (because that contractor is not registered with service tax). If registered then responsibility is Provider 25 % and receiver is 75 % . In your case A pvt. ltd. Mfg Company so no need to pay S.T(Totally agree with Ravinder Jee)

''IN terms of Notification No. 30/2012-ST dated June 20, 2012, the partial reverse charge mechanism is applicable, interalia, to services provided or agreed to be provided by way of supply of manpower for any purpose, by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as a body corporate located in the taxable territory.''