Reverse charge in case of service tax

This query is : Resolved

RAJESH VERMA (Querist)
Follow

17 June 2013 A COMPANY HAS TAKE SERVICE OF CAR REPAIR, DENTING PAINTING AND LABOUR CHARGE OF HIS OWNED CAR, FROM A PROPRIETORSHIP FIRM. NO SERVICE TAX IS LEVIED ON BILL BY SERVICE PROVIDER. IS THERE LIABILITY OF CO. UNDER REVERSE CHARGE OF SERVICE TAX TO PAY SERVICE TAX. IF YES HOW MUCH.

Ganeshbabu K

Ganeshbabu K (Expert)
Follow

17 June 2013 Yes,..you need to discharge reverse charge liability,

1)it will come under work contract service as per section 65B(54) of Finance Act, 1994 as introduced w.e.f. 1-7-2012.

2)50% tax by service receiver if service provider of works contract service is individual, HUF, proprietary or partnership firm or AOP

3)AND service receiver is business entity incorporated as body corporate.

Thanks & regards
Ganesh babu k

Message likes : 1 times

Ganeshbabu K

Ganeshbabu K (Expert)
Follow

17 June 2013 4)50% service tax is payable by service provider and 50% by service receiver. The service receiver liable for 50% even if service provider does not charge service tax.

5) Service tax is payable by service receiver when actual payment is made to service provider and not on receipt of Invoice from service provider. However, if payment is not made to service provider within 6 months, service tax is anyway payable. Interest is also payable.

Thanks & regards
Ganesh babu k

Message likes : 1 times

Upgrade to CAclubindia Pro. Subscribe Now!

RAJESH VERMA

RAJESH VERMA (Querist)
Follow

17 June 2013 SIR,
I WANT TO KNOW ONE MORE THING.
IF ON THE INVOICE ONLY MENTIONED LABOUR CHARGES. THEN WHETHER IT IS LIABILITY OF COMPANY TO PAY SERVICE TAX.

Ganeshbabu K

Ganeshbabu K (Expert)
Follow

17 June 2013 Yes..
reverse charge attracts only on Service portion in execution of Works Contract.

So reverse charge applicable on labor charges
as per rule 2A of service tax (determination)rules 2006

if it is found difficult to determine valuation as per rule 2A we need to take help of claus (ii) of rule 2A... asper that 70 % of total amount charged in case of repairs if "property transferred in goods" not able to find out.

You may not get, some clear idea on i..i would request you to please do refer below article which will be useful..

http://www.indiantaxupdates.com/2013/01/25/service-tax-reverse-charge-mechanism-accounting-treatment/

Thanks & regards
Ganesh babu k

Message likes : 1 times