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Service tax liability- reverse charge

sivakumar (Asst Manager - F&A) (324 Points)

31 March 2014

Hi,

We are doing clearing and forwading services. We received Transport bill with servie Tax as per GTA from our Vendor. They levy 25% service tax on 12.36% to us. We have charged Transport charge to our customer under Non Taxable head with some margin. We are doing service on behalf of our customer.

My Query is

1. who is liable to pay rest of the 75% tax on 12.36% as per GTA.( we or our customer )

2.Can we utilise the 25% of service tax amount as a Input Service Tax.

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5 Replies

Vishal Gupta (CA) (59 Points)
Replied 01 April 2014

As per the provision of reverse charge, service tax is payable by service receiver on 25% of the value(transport charges) if cenvat credit has not been availed by service provider. If cenvat credit has been availed by service provider then service tax is payable by service receiver on 100% of the value.

In your case, obtain a certificate from service provider stating that cenvat credit has not been availed & then balance 75% wont be payable by you(being the service receiver). Service Tax is to be paid by the customers only on the "margin" charged by you.

Yes, you can avail input tax credit on the 25% service tax paid.

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vaibhav (student) (253 Points)
Replied 01 April 2014

Service provider mentions in his bills that, we are not availing any service tax credit or charging service tax while providing services. In such case, GTA liability (12.36% x 25%) is of service receiver. This is abated rate and hence there is no requirement to pay balance portion. Further, after making payment of serice tax under GTA, service receiver can availed & utilise the service tax credit. But there should be payment first. (Challans required)

1 Like

sivakumar (Asst Manager - F&A) (324 Points)
Replied 01 April 2014

Thank you Mr.Vishal and Mr. Vaibhav . As per your statement Service Receiver should pay 25% on service Tax. But we recived bill from service provider they charged 25% of tax on ST. Please clarify.

Note: our vendoer offer service to us and bill to us.

We are billing to our customer for particular service.

In this case who is service provider , service receiver?

mukesh (CA FINAL) (148 Points)
Replied 02 April 2014

Sir under GTA both normal charge and reverse charge is applicable

Normal charge is applicable when the SR does not belong to organized sector.

Reverse charge is applicable when SR belongs to organized sector

Organized sector here means Body corporate, Partnership firm ,society, factory

As told by you 25% has been charged by the SP, you probably belong to unorganized sector therefore under normal charge service tax shall be paid by the service provider

Rashmi (CA Final Student) (137 Points)
Replied 02 April 2014

Sir,

As per abatement notification no. 26/2012-ST, service tax on GTA service shall be calculated in the following manner: (25% x value of service) x 12.36%

This entire amount is to be deposited by the service recipient. So answer to your first query is that the remaining 75% is an abatement which need not to be paid by any party.

Secondly, presuming that you are not an individual assessee, it is wrong on the part of your GTA vendor to charge 25% of 12.36% in the invoice because as per notification 30/2012-ST, 100% of service tax for GTA services shall be payable by the service receiver only. This service tax should be paid by you directly to the department and not to your vendor. Hence, you should ask your vendor to revise his invoice.

However, if you are an individual; assessee, the practice is entirely correct and you can take credit of 25% of service tax amount as a Input Service Tax if the same qualifies as your input service as per CENVAT Credit Rules, 2004

Further, clarification on the above issue can be given on the basis of your nature of business/ transaction.