Service tax liaibility

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 June 2010 Dear all,

Suppose a company by mistake pays an service tax on bill of contractor who is actually exempted from service tax as his limit of turnover doesnot crosses Rs.10.00 lakhs,in such a case if that contractor utilises the money for him self but does not deposits into govt.treasury what will be the consequences on contractors and company.

Regards.

Rajesh K

Shyam Lal Naik

Shyam Lal Naik (Expert)
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29 June 2010 The company has paid the service tax, as the contractor has charged the service tax in his bill.

The exemption from Service tax upto Rs. 10 Lakh is not automatic. It is optional. As the contractor has charged service tax, he has not opted for the exemption. It is incorrect to say that the service tax is exempted on this ground.

It is the liability of the contractor. If not paid, penal consequences like interest and penalty shall follow.

Even assuming that the tax was collected wrongly, the same shall be remitted into Govt's tresury u/s 73A.

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