Reverse charge mechanism.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 October 2012 The service provider has provided the service of supply of Buses on Hire.He has charged service tax @ 12.36% in the Bill on the entire value of the service.We are a Pvt Ltd company?How much % service tax we will pay to the department under reverse charge and what amount we would pay to the service provider?

MOHAMMAD SALIM

MOHAMMAD SALIM (Expert)
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11 October 2012 It is pertinent to mention here that reverse charge is applicable in event of renting of motor vehicle designed to carry passengers to any person who is not engaged in similar line of business.

From question it appears that the bill has been raised on full value i.e. without abatement of 60%. Accordingly in such a case as per notification no 30/2012-ST did 20th June, 2012, only 40% of the total service tax needs to be deposited to govt. directly by service receiver.

for e.g. Bill of Rs 100 plus serve tax rs 12.36 has been issued. In such a case payment of only Rs 4.944 will be paid by service receiver to govt directly.Balance amt of Rs 100 plus serve tax of Rs 7.416 will be paid to service provider by service recipient.

Hope this has settle the issue....

Querist : Anonymous

Querist : Anonymous (Querist)

11 October 2012 Thanks a lot for explaining it with an example.Yes this has settled the issue.
But one more thing which I would like to ask is that in the example which you have given,suppose we pay 4.944 to govt directly ...then we will be paying balane Rs 107.416 to the service provider.It means the Debtor will stand at Rs 107.416.But the Invoice value is Rs 112.36.Can we book the debtor at an amount lower than the Invoice value?

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MOHAMMAD SALIM

MOHAMMAD SALIM (Expert)
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11 October 2012 Yes why not... Although the service provider should raise invoice of only Rs 107.416... However if he raises for full amount we need to book accordingly...

Querist : Anonymous

Querist : Anonymous (Querist)

12 October 2012 Thanks salim sir.

MOHAMMAD SALIM

MOHAMMAD SALIM (Expert)
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12 October 2012 you are most welcome....