double payment of service tax - URGENT

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This query is : Resolved

vijay (Querist)

29 August 2009 'Z' is giving a contract to 'X' for Rs.100 with a profit margin of 5%...'X' has sub-contracted to 'Y'. After finishing contract 'Y' raised invoice to 'X' with service tax of 10.3% which comes to 110.3%. Again 'X' will invoice 'Z' with 5% profit margin and service tax of 10.3% on the total which comes to Rs.128.04...

in this case 'Z' is paying service tax twice and is getting input credit one time only....

if it is a direct contract 'Z' has to pay Rs.115.81 only but if it is sub-contract 'Z' has to pay Rs.128.04 with differential service tax of Rs.12.23.

is there anyway to reduce the service tax or one time payment...?????

URGENT

Shyam Lal Naik

Shyam Lal Naik (Expert)

31 August 2009 Bill by Y

Service = Rs. 100.00
S Tax = Rs. 10.30
Total = Rs. 110.30

Bill by X

Cost of Service = Rs. 100.00
Add : Margin 5% = Rs. 5.00
Pre tax price = Rs. 105.00
S. Tax = Rs. 10.82
Total Invoice = Rs. 115.82

Tax payable by X

S Tax Payable = Rs. 10.82
Less : Cenvat = Rs. 10.30
Payable in cash = Rs. 0.52 Only

The invoice vale to Z will be Rs. 115.82 only as against Rs. 128.04, as mentioned in your query.

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