Urgent reply

My Friend started a new company since 8 months ago. His client used to make the payment of bill inclusive of service tax 25% and remaining 75% his client has paid to the govt.As lack of knowledge about the service tax he has used that tax amount and even not registered also so kindly advice how this issue can be solved? 

Replies (2)

@ Rekha..it is a reverse charge mechanism...under this there r about 10 services againt which the amount of service tax is deposited by the service receiver...it has many complexities so i m unable to describe u as a whole.....so.. i think ur friend's company is taking the service of "SUPPLY OF MAN POWER" ..is it??....coz  for this service, reverse charge mechanism is applied...it is as follows....SERVICE PROVIDED BY AN INDIVIDUAL OR PARTNERSHIP FIRM ETC. TO ANY COMPANY LOCATED IN A TAXABLE TERRITORY, IN RESPECT OF  SERVICES PROVIDED BY WAY OF SUPPLY OF MAN POWER FOR ANY PURPOSE IS COVERED UNDER RULE 2(1)(d) OF SERVICE TAX RULES 1994(REVERSE CHARGE), AND THE AMOUNT OF TAX IS TO BE DEPOSITED BY THE SERVICE RECEIVER HIMSELF....FURTHER, FOR THIS PARTICULAR SERVICE THERE IS A BYFURCATION OF THE AMOUNT WHICH TO BE DEPOSITED BY THE RECEIVER AND PARTLY BY SERVICE PROVIDER(DONO KO THODA THODA PAY KRNA PADEGA)...THE %  IS AS FOLLOWS...

SERVICE PROVIDER--25%

SERVICE rECEIVER--75%

Further, kindly clarify that what is ur friend's company's gross receipt?? if it is more than 10 lakhs then u should deposite that 25 % amount to the deptt by talking registration....but if not more than 10 lakhs then u should not have charged that 25% service tax in ur bill..its wrong..coz until u issue a bill inclusive of service tax how can the client make the payment inclusive of service tax ...so, either internally u cancel the bill nd issue the new one without tax amount..or  take the registration nd make the payment of tax which u hv already collected to deptt...do any one.

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