Payment of service tax on legal consultancy
This query is : Resolved
01 August 2012
hello, would like to know how the service tax payment has to be made on the legal consultacy received from law firm.
1. Whether this service tax can be clubbed under the service tax which my company pays on Renting of Immovable property Services.
2. If the same need to be paid jointly under what head this tax need to be paid
regards
pankaj
1. Whether this service tax can be clubbed under the service tax which my company pays on Renting of Immovable property Services.
2. If the same need to be paid jointly under what head this tax need to be paid
regards
pankaj
01 August 2012
No, dont club this. Pay consultancy advocate bill under separate challan using the service tax new code 00441089 under reverse charge and now Pay your renting of immovable property services also in the new code 00441089 after availing the input tax credit (based on the challan) on the payment of advocate bill.
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03 August 2012
thanks sir,
service tax has become a bit complicated wef july 12
thanks a ton
pankaj
service tax has become a bit complicated wef july 12
thanks a ton
pankaj
03 August 2012
Yes it is complicated especially in reverse charge mechanism from 01.07.2012.
03 August 2012
hello sir,
can i avail cenvat credit on brokerage paid on account of getting a lessee for our premises and if yes can i take the full credit for the same or it would also be under the reverse charge mechanism.
regards
can i avail cenvat credit on brokerage paid on account of getting a lessee for our premises and if yes can i take the full credit for the same or it would also be under the reverse charge mechanism.
regards
09 August 2024
The eligibility to avail CENVAT credit on brokerage paid for getting a lessee for your premises and the implications of reverse charge mechanism are subject to specific conditions under the CENVAT Credit Rules and GST laws. Here’s a detailed explanation:
### **1. CENVAT Credit on Brokerage Paid**
**Nature of Service:**
- Brokerage paid for getting a lessee for premises is generally considered as a service related to the leasing of property. This would typically fall under the category of "Business Support Services" or "Service for Renting of Immovable Property" depending on the specific nature of the service.
**CENVAT Credit Eligibility:**
- **For Pre-GST Era (CENVAT Credit Rules under Service Tax):** Generally, brokerage paid for leasing out property is not eligible for CENVAT credit if the service is related to immovable property. CENVAT credit was primarily available for inputs and input services used in the course of providing taxable output services or manufacturing taxable goods.
- **For Post-GST Era (GST Law):** Under GST, the treatment of input tax credit (ITC) on brokerage paid for leasing out property can be more specific:
- **Leasing of Property:** As per GST rules, if the property being leased is used to provide taxable services or for furtherance of business, the brokerage paid for leasing that property can potentially be eligible for ITC.
- **Section 17(5) of CGST Act:** This section outlines blocked credits under GST, and one of the exclusions is for “goods or services or both received by a taxable person for construction of an immovable property on his own account, other than plant and machinery.”
**Practical Example:**
- **If your company is engaged in providing taxable services** and you pay brokerage for leasing a property that is used for providing those services, you can avail ITC on the brokerage as it is related to your business operations.
### **2. Reverse Charge Mechanism (RCM) Implications**
**Reverse Charge Mechanism (RCM):**
- Under the reverse charge mechanism, the recipient of the service is liable to pay the tax instead of the supplier.
- If the brokerage service is covered under reverse charge provisions, the recipient (you) must pay the service tax/GST directly to the government and can claim credit for the same.
**Practical Example:**
- **Brokerage Service Under Reverse Charge:** If the brokerage service is provided by an individual or a partnership firm not registered under GST, you might need to pay GST under reverse charge.
**Key Points for RCM:**
- **Verification:** Confirm whether the brokerage service falls under reverse charge provisions. You should verify this based on the GST notifications and rules applicable.
- **Payment and Credit:** If RCM applies, pay the applicable GST under reverse charge and claim the input tax credit in your GST returns.
### **Steps to Follow:**
1. **Determine the Nature of Brokerage Service:** Identify if the brokerage service falls under the categories where CENVAT credit or ITC is allowed.
2. **Check Reverse Charge Provisions:** Verify if the brokerage service is subject to reverse charge mechanism.
3. **Documentation:** Maintain proper documentation of the brokerage service invoice, payment proof, and relevant GST returns.
4. **Claim Credit:** If eligible, claim CENVAT credit (pre-GST) or ITC (post-GST) as per the applicable rules and regulations.
### **Conclusion:**
- **Pre-GST Era:** CENVAT credit on brokerage for leasing property was generally not allowed.
- **Post-GST Era:** Under GST, ITC on brokerage for leasing out property used in business is typically allowed if it pertains to taxable business activities.
- **Reverse Charge:** Ensure to check if reverse charge applies to the brokerage service and comply with payment and credit procedures accordingly.
For specific guidance and compliance, consult the GST laws, notifications, and seek advice from a tax professional or consultant.
### **1. CENVAT Credit on Brokerage Paid**
**Nature of Service:**
- Brokerage paid for getting a lessee for premises is generally considered as a service related to the leasing of property. This would typically fall under the category of "Business Support Services" or "Service for Renting of Immovable Property" depending on the specific nature of the service.
**CENVAT Credit Eligibility:**
- **For Pre-GST Era (CENVAT Credit Rules under Service Tax):** Generally, brokerage paid for leasing out property is not eligible for CENVAT credit if the service is related to immovable property. CENVAT credit was primarily available for inputs and input services used in the course of providing taxable output services or manufacturing taxable goods.
- **For Post-GST Era (GST Law):** Under GST, the treatment of input tax credit (ITC) on brokerage paid for leasing out property can be more specific:
- **Leasing of Property:** As per GST rules, if the property being leased is used to provide taxable services or for furtherance of business, the brokerage paid for leasing that property can potentially be eligible for ITC.
- **Section 17(5) of CGST Act:** This section outlines blocked credits under GST, and one of the exclusions is for “goods or services or both received by a taxable person for construction of an immovable property on his own account, other than plant and machinery.”
**Practical Example:**
- **If your company is engaged in providing taxable services** and you pay brokerage for leasing a property that is used for providing those services, you can avail ITC on the brokerage as it is related to your business operations.
### **2. Reverse Charge Mechanism (RCM) Implications**
**Reverse Charge Mechanism (RCM):**
- Under the reverse charge mechanism, the recipient of the service is liable to pay the tax instead of the supplier.
- If the brokerage service is covered under reverse charge provisions, the recipient (you) must pay the service tax/GST directly to the government and can claim credit for the same.
**Practical Example:**
- **Brokerage Service Under Reverse Charge:** If the brokerage service is provided by an individual or a partnership firm not registered under GST, you might need to pay GST under reverse charge.
**Key Points for RCM:**
- **Verification:** Confirm whether the brokerage service falls under reverse charge provisions. You should verify this based on the GST notifications and rules applicable.
- **Payment and Credit:** If RCM applies, pay the applicable GST under reverse charge and claim the input tax credit in your GST returns.
### **Steps to Follow:**
1. **Determine the Nature of Brokerage Service:** Identify if the brokerage service falls under the categories where CENVAT credit or ITC is allowed.
2. **Check Reverse Charge Provisions:** Verify if the brokerage service is subject to reverse charge mechanism.
3. **Documentation:** Maintain proper documentation of the brokerage service invoice, payment proof, and relevant GST returns.
4. **Claim Credit:** If eligible, claim CENVAT credit (pre-GST) or ITC (post-GST) as per the applicable rules and regulations.
### **Conclusion:**
- **Pre-GST Era:** CENVAT credit on brokerage for leasing property was generally not allowed.
- **Post-GST Era:** Under GST, ITC on brokerage for leasing out property used in business is typically allowed if it pertains to taxable business activities.
- **Reverse Charge:** Ensure to check if reverse charge applies to the brokerage service and comply with payment and credit procedures accordingly.
For specific guidance and compliance, consult the GST laws, notifications, and seek advice from a tax professional or consultant.
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