My company provides software services to a customer and charges 1 Lac rupees. As part of the services, we need to sub-contract part of the work to a graphics designer Y. Y charges us his fees of 25,000 plus service tax.
When we invoice our customer for 1 Lac, are we supposed to
- Charge Service Tax on total amount of 1 Lac OR
- Charge Service Tax on 75,000 being the service we provide
If 1. above is correct, are we not then paying double service tax on the 25,000 portion of the services?
If 2. above is correct, do we have to split the amounts on the invoice as 75,000 and 25,000. We would rather not show the split to our customer.
Is there an alternate way to treat this to avoid double taxation on the sub contracted service? Is there something in the service tax return that can be used to claim credit for the service tax on the inputs used to provide the service?
CAclubindia
