If X company is service receiver of a works contract service provided by Y, who is an individual, the X co will be liable to pay service tax on 50% of the service under provision of reverse charge while Y will be liable for 50%. But,in what way the provision will apply and liability of both will be affected if Y has opted for abatement? Please elaborate. Thanx in advance.
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Service tax on works contract
Replies (10)
Service Tax portion under Works contracts for both SP & SR, SP is liable 50% of ST and SR is liable to pay 50% of ST.
if Mr. Y do not reach on minimum exeption limit i.e. Rs 10 Lakh then he is not liable to pay service tax, but in case of Company X, Company will be liable to pay 75% of Service tax under Reverse Charge Machenism.... Under Reverse Charge no Abatment is Available.
If Service Provider levy 12.36% service tax in Invoice then whether Service Receipent is also layble for booking of Service Tax Payable in favour of govt. under reverse charge mechenism.
In works contract service 50% of service tax will be payable by service receiver and 50% by the service provider if the following conditions are satisfied:
Two options are there:-
Pay service tax on Value of services after deducting value of goods from the gross value.
Pay service tax at composite rate
- In case of original work, pay service tax on 40% value,
- In case of maintenance or repair or reconditioning or restoration or servicing of any goods, pay service tax on 70% value,
If the amount is say 1000 rupees (Original Work)
Liability on service receiver :- 1000*40%*12.36%*50%
Liability on service provider :- 1000*40%*12.36%*50%
(Is imp to note that service provider and receiver can have independent valuation)
Dear Parmita,
My query still unsolved, If whole liability booked by service provider then whether recepeiant is also layble for paying service tax to govt. for his part i.e.50%
Dear Sanjeev,
on payment of that bill you have to deduct your portion in 12.36/- of ST. if Provider already paid total 12.36/- to the govt means,
as a recepeiant also liable his portion of ST to remit to the govt.
Dear Sathya,
This mean govt. impose double tax on people by way of service tax beacuse in initial stage of reverse charge mechenism every person not aware from this.
The service recipient will be stil liable to discharge its liability, and if he has paid 100% to the service provider he can ajdust the same in next bill or through notes.
Friends i have a question.
Is hire purchase considered as works contract under Service Tax?
My client has taken a Xerox machine under a contract for monthly rent & maintenance.
Can this be considered as works contract, which will in turn attract Service tax under reverse charge mechanism?
Thanks!
Please attend the below question also after attaining the above one.
A Co. has provided a works contract service in year 2010-11 of Rs 100,000, and booked the service in the said year; and now receives the payment for the said service in 2012-13. It has not collected service tax in 2010-11, but is now paying service tax 12360 on 100,000 in 2012-13. Is this treatment correct?
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