Service tax on reverse charge

This query is : Resolved

Amit (Querist)
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13 August 2012 As per notification no. 46/2012 of service tax, security services has also been covered under reverse charge mechanism wef 7th August 2012. For reverse charge mechanism, point of taxation is date of payment in respect of the persons required to pay tax as recipients of service. My query is as follows

Consider the case where - the vendor bills which are raised before 7th August and my company will be paying the same after 7th August -

So in the above case, as per recent notification my company have to pay 75% of service tax under reverse charge on security services wef 7th August 2012 at the time of payment to vendors. But that vendor must have paid the full service tax while booking the invoice as it is payable on accrual basis. So vendor may not agree if we pay only 25% of service tax amount to him. Is there any clarity on the same. Please help

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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13 August 2012 Here, the problem arises because As per rule 7 of the point of taxation rules, the point of taxation in respect of the persons required to pay tax as recipients under the rules made in this regard in respect of services notified under sub-section (2) of section 68 of the Finance Act, 1994 shall be the date on which payment is received or made, as the case may be.
Accordingly, point of taxation will be after 07 august 2012.The law at the time of payment has to be seen.
But on the other hand, before the notification has come into force, the security service provider was liable for tax at the time of billing.

Hence, since the payment which has already been made, can not be paid again to the government.