Service tax input

This query is : Resolved

ACS,CMA Basant chaudhury (Querist)
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15 April 2016 CAN WE CLAIM INPUT ON SERVICE TAX BILL RAISED BY CONTRACTOR FALLING UNDER REVERSE CHARGE WHERE 70% IS TAXABLE. HE RAISED BILL BY CHARGING 7.25% OF SERVICE TAX. PLS HELP ME WHETHER WE ARE LIABLE TO PAY BALANCE 7.25% OR CAN WE TAKE CREDIT OF THAT

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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15 April 2016 Works Contract Service is taxable under Partial Reverse Charge Mechanism. Under this the Service Provider is liable for 50% of the Service Tax liability and the Service Receiver for the rest 50%. Again irrespective of the basis adopted by the Service Provider, the Service Recipient can follow his own method.

The tax under RCM has to be paid only in CASH through e-challan. So you cannot take CENVAT Input Credit for the 7.25% tax paid to the contractor. You will have to pay further tax under RCM @ 5.08% i.e on 35% of the invoice @14.5%.

The Service Tax paid alone is entitled to be treated as input and not Swachh Bharat Cess which is not an eligible Input for CENVAT Credit. Therefore 7% of the tax paid to the contractor and 4.90% of the RCM paid by you can be used as input for payment of any other output service tax.