Suppose a partnership firm engaged in developing residential apartments has appointed a sub-contractor for a particular work in the project.This sub-contractor is a proprietorship firm.
To the Best of my knowledge, Reverse charge will not be applicable here as the Service receiver is not a Company under Companies Act,1956. The service provider i.e the sole proprietor will be liable to charge Service Tax as well as liable to deposit the same.
I agree with you Anil Sir, but in Reverse charge notification, it is mentioned that Service recipient to deposit service tax if it is a Comapny or a Business Entity. So will we not consider a Partnership Firm as Business Entity??
Hi,
The relevant part of the notification is as follows:-
"provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger or supply of manpower for any purpose or works contract by any individual, Hindu Undivided Family or proprietary firm or partnership firm, whether registered or not, including association of persons; located in the taxable territory to any company formed or registered under the Companies Act, 1956 (1 of 1956) or a business entity registered as body corporate located in the taxable territory;"
Here the Business entity should be a Body Corporate and as Partnership Firm is not a body corporate Reverse charge should not be applicable.
Thank you so much Anil Sir, It is crystal clear now.
CAclubindia
