Reverse charge mechanism

This query is : Resolved

Sobhan (Querist)
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06 July 2013 Earlier Scenario :
Inv amt Rs 100
S.Tax @ 12.36 = 12.36

Total Rs 112.36

The entire amt was paid to the vendor after TDS & input credit of Rs 12.36 was adjusted.

New Scenario :

Inv amt Rs 100/-
S.Tax@ 40% Rs 4.94 say Rs.5
Total Rs 105/-

The amount after TDS is paid to the vendor, & Input credit is adjusted on Rs.5/-

The vendor is supposed to deposit the balance i.e.12.36-5 = 7.36 of the S.Tax.
Now the vendor if he do not have any input credit,has to pay the entire Rs.7.36 out of his pocket which is an additional liability / expense for him.Or in other words wherefrom will he recover the extra burden of Rs 7.36 if he do not have any scope of increasing the rate / revenue /adjusting input credit.

The S Tax authorities revenue is secured as before with an addl benefit,i.e. the non utilisation of the input credit (if any) of the vendor in the new scenario.

Please share your thoughts.

Regards,
SK De

Pradeep Nainawati

Pradeep Nainawati (Expert)
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07 July 2013 The vendor is never suppose to pay out of his pocket the ST. Under reverse charge the service recipient will directly pay to gov. instead of paying to Service Provider. Further he can take credit of such tax paid if it falls under Input Service definition

Sobhan

Sobhan (Querist)
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08 July 2013 In the above scenario wherefrom the vendor / service provider recover the 60% of the S.tax i.e Rs 7.36/-

Please share your thoughts.

Thanks & Regards,
Sobhan

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Pradeep Nainawati

Pradeep Nainawati (Expert)
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08 July 2013 Mr. Sobhan, please give some more details, specially the category of service than i will be in better position to tell.

Sobhan

Sobhan (Querist)
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08 July 2013 Dear Mr.Pradeep Nainawati,

The vendor is a transporter with a media co. The facility is used by the company for the transportation of its RJ's & VJ's.

Thank you.

Best regards,
Sobhan

Pradeep Nainawati

Pradeep Nainawati (Expert)
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08 July 2013 In case of renting of motor vehicle if service provider has opted for abatement than 100% tax is required to be paid by the Service recipient. In case of abatement the service tax required to be paid is 4.944%

If service provider has not opted for abatement than Service provider is required to charge 60% of ST i.e. 7.416% on invoice. Remaining tax i.e. 4.944% is required to be paid under reverse charge by service recipient.