Service tax, question & answer - 3

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Q.ABC LTD COMPANY HAS RECEIVE MANPOWER HIRING  SERVICES FROM MR.A. MR. A NEVER PAID TO SERVICE TAX BECAUSE HIS TURNOVER LIMIT IS BELOW THE THRASH HOLD LIMIT EVER YEAR.

FROM 01.07.2012, ABC LTD IS LIABLE TO PAY SERVICE TAX UNDER REVERSE CHARGE.

NOW QUESTION IS WHETHER ABC LTD IS ALSO PAY SERVICE TAX UNDER REVERSE CHARGE ON OTHER EXPENSE (OTHER THAN MANPOWER HIRING CHARGE) INCLUDING IN INVOICE?

ANS:- YES.

Rule 5(1)& (2) of the Service Tax (Determination Of Value) Rules, 2006 say that where any expenditure or costs are incurred by the service provider (except as Pure Agent) in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.

 

Explanation 2 to Rule 5(2) further clarifies that the value of the taxable service is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration is indicated separately in the invoice.

 

Hence, in my opinion, service tax shall be payable by the recipient, under reverse charge mechanism (RCM), on the total consideration being paid (i.e. fees plus expenses or  other costs incurred).

 

Replies (37)

Yes, ABC Ltd is liable to pay Service tax because under reverse charge mechanism exemption of basic threshold limit is not available, the service receiver is liable to obtain registration and also liable to pay tax

Thank you Navin Sir....this series is really helpful and easily understandable....Keep sharing.

Navin Sir you are doing a Great Job by spreading knowledge.

Thanks a lot sir

Regards

Sanyam

Thank you for sharing ......................

nice.................

Thanks for sharing....

knowledgeable sharing ...

Yes I also agree to the Reply by Mr. Navin, Service Receipient has to pay Service Tax on behalf of the Security Provider. Please note that this is applicable for Security Services, if the Security Provider is an Individual, HUF, partnership Firm, LLP,AOp wef 07/08/2012.

 

 

 

  @ VINITA

Service Tax Under Reverse Charge also applicable on in any other expenses including in invoice value.

Yes Sir I am aware of it

sir , thanks for sharing &

Plz keep sharing

 

sir , thanks for sharing &
Plz keep sharing

i had the same doubt. if service provider's(here work contract service provider) taxable service does not exceed exempted limit, is the service receiver is liable to pay???

yes, service receiver is liable to pay service tax seince exenption limit is not applicable to service receiver.


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