Vendor - service tax payment

The organisation has employed a dance company for performance at their Annual Day. The dance company does not have a service tax registration number and in all probability are earning more than INR 10 Lakhs per annum. If the dance company is hauled by the Service Tax authorities for not paying their service tax, would the organisation employing the dance company also have a reputational risk as they knew well in advance of the lack of a service tax registration number? Is the organisation equally liable as it was also a partner in the process?

Replies (4)

Sir,

Your service is taxable service so that you have to registered with said dept. otherwise dept. taken the penalize action.  

Sir,

the organisation in the capacity of service receiver will not be liable in any manner if dance company is hauled by the ST authorities...

If any demand is served upon the dance company to pay their service tax dues, then they shall be solely responsible, they will not approach you to collect service tax..

To obtain timely regsitartion and pay service tax is the responsibilty of service providers..service receivers have no role in it unless it's a case of RCM 

Thank you Harendra and Rashmi for your replies.

Rashmi, one specific question. If the dance company is penalised by the Service tax authorities for the non-payment would there by any reputational damage to the organisation as it has engaged the dance company very well knowing that it does not have the service tax registration number as it normally ought to have. This non-compliance of the dance company had been falled by the vendor due diligence team of the organisation.

Sir,

There is no provision in the law that binds a service receiver (SR) or holds SR responsible to ask service provider to take registration.

 

Further, even if dept. initiates proceedings against service provider (SP), the service receiver is not legally bound to pay service tax at that time. When SP shall be paying his liability of service tax demanded by dept., the invoices raised by him shall be considered as inclusive of service tax. This implies that payment made by you is considered as inclusive of service tax component. No further tax will be required to be paid by you at the time of proceedings because you have already paid it.

 

Consequently, no reputational damage shall fall upon your institute since demand shall be raised only and only upon the dance company, without involving any trace of service recipients.

Sorry for the late reply.

Hope this satisfies your query.

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