Service tax query

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MRIDUL

DGM

23 Points Posted on 06 January 2013

An amount received from the government in installments by Public sector undertaking for implementing e-governance project in Govt. departments. PSU further assigns that work to specialized agency to execute the work. In this process, PSU earns some percentage as income like 5%.

Brain storming Question :-

1. What is the service tax liability for PSU?
2. Whether Service tax is applicable on the Income part only or the gross receipt amount received from Govt.?
3. Service tax applicability at the time of receiving advance from Govt. or at the time of billing to sub-contractor.?

Thanks in advance!!!

Replies (2)

Rajeev Kumar Garg

Consultant of Excise Customs & Service

550 Points Posted on 06 January 2013

Dear Mr. Mridul,

Here are the answers:

For Q1 & Q2: Service tax is applicable on the gross amount received from the government.

For Q3: Service tax is applicable at the time of receiving advance from the government.

Further to add that PSU can take cenvat credit on service tax paid on input service received from sub contractor and can adjust that cenvat credit for payment of service tax payable on gross amount.

Thus, ultimately the net liability will be paid on net profit earn or value addition in service charges.

Rajeev Kumar Garg

(M.Com, L.L.B.)

Consultant (Excise, Customs & Service Tax)

Ph. No. 7500802402.