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St reverse charge mechanism

Yashwant Patel (Working with CA firm) (117 Points)

27 February 2013

hiiiiiiii friends

if i am a corporate and sub-contracted my some work to a propriter and also paid 50% advance to that person, as per service tax law service tax is imposed on earlier of date of payment or provision of service( for the time being ignore POT),

In that case i am covered in reverse charge mechanism and liable to ST on 50%,

can u help me whether i am liable to pay service under reverse charge mechenism at the time of payment of advance.

if not than on which date i am liable to service tax

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2 Replies

CA. Rachna Parashar (partner) (196 Points)
Replied 28 February 2013

As per rule 7 of point of taxation rules in case of service recipient the point of taxation will be the date of payment and if provision of service has been been made than if amount recd within 6 months than the point of taxation will again be receipt of payment but if amount is not recd within 6 months than date of issue of invoice if issued in prescribed time and if not issued in time than date of completion of service. So in your case you have to pay service tax at the time you have paid advance amount

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Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 28 February 2013

Yes, if you are a service receiver and you are covered under partial reverse charge, you have to pay ST at the time of payment to the service provider, irrespective of advance nature of payment.

But as you said you have to pay 50% ST, so it means you have given 'Works Contract' because only in WC the tax liability is 50% each. So please check whether the service is a 'Works Contract' ie. whether it involves transfer of property in goods leviable to tax on sale of goods and other conditions are satisfied.

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