Reverse charge mechanism

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sreekanth p d (Querist)
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10 October 2014 Dear sir/madam,
One company is taking supply of man power services from non company..
But the service receiving company is charging service tax on 75% portion only.
we asked the reason for it then they are telling that that non company is not charging service tax so we are not paying them like that they are telling....
As on auditor how can we deal the above case....

MOHAMMAD SALIM

MOHAMMAD SALIM (Expert)
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10 October 2014 If RCM is applicable the liability of tax under RCM of service recipinet needs to be deposited directly by him with Govt and not to be paid to service provider... Thus 75% of serv tax in this case needs to be paid by service recipient to Govt... This is irrespective of fact that the service provider is not laible to pay tax and thus has not charged any tax in the invoice....

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Ganeshbabu K

Ganeshbabu K (Expert)
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10 October 2014 Serice provider may claim that he is small service provider and may not charge service tax in his invoice
.
.
but is mandatory for service receiver to pay 75% of service tax directly to department in GAR7 &credit may be allowed on payment

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sreekanth p d

sreekanth p d (Querist)
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11 October 2014 Thank you so much sir for your reply.
In connection to this ..........
Some times company is not charging service tax for many invoices even though RCM is applicable....
Where can we report on this type of issues...as an Auditor.....

Ganeshbabu K

Ganeshbabu K (Expert)
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11 October 2014 Just find out reversecharge cases where company not made payment to department
..
.
and create a provision in financials for the service tax payable
.
.
and you may report in CARO Clause 9 if it meets the creteria

sreekanth p d

sreekanth p d (Querist)
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11 October 2014 ok Thanks sir,
So even though service provider is a unregistered we have to pay the service tax as per RCM right?

And as you said we have to create provision and we have to make the payment on it....right...

Ganeshbabu K

Ganeshbabu K (Expert)
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11 October 2014 Yes, you have to pay your part of service tax irrespective of fact whether your service provider is registered under SERVICE TAX OR NOT

Ganeshbabu K

Ganeshbabu K (Expert)
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11 October 2014 Ofcourse..

Just find out what is the amount payable under reversecharge

create a provision
.
.
same may be comes under 43B clause of tax audit if applicable.

if not paid before due date of filing return it is disallowed

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sreekanth p d

sreekanth p d (Querist)
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13 October 2014 Thank sir,
If i asked them to pay the service tax.They may ask like as they filled ST-3 for that period and due date for revised return also over na?????

In these case how can we deal...????

Ganeshbabu K

Ganeshbabu K (Expert)
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14 October 2014 ASK THEM TO PAY NOW ALONG WITH INTEREST RATE APPLICABLE AND SHOW IN THE HALF YEAR IN WHICH THEY HAVE PAID AND CLAIM INPUT ON PAYMENT

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