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Billing in the case of reverse charge method

NIRAV (CA) (62 Points)

08 November 2013

I wnna know how to bill in the case of a concern providing HR services. Suppose the bill amount for services is Rs. 25000/- then how to show Service Tax in the bill and what amount to be charged in the bill as a Service tax and also want to know about the credit that can be claimed under reverse charge method and service tax liability of the services provider as well as receiver. Is it correct that under reverse charge method, no credit can be claimed?

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8 Replies

Sidharth (Article Assistant) (80 Points)
Replied 08 November 2013

By the term 'HR Services' it seems that the concern is engaged in providing manpower recruitment services.

Such services are covered under partial reverse charge mechanism provided, the concern is a non body corporate and it provides services to body corporate.

If such is the case,

Liability of Service provider :

Liability = 25000*25/100*12.36/100 = Rs. 772.5

Liability of Service receiver :

Liability = 25000*75/100*12.36/100 = Rs. 2317.5

Service provider should charge only 25% ie. Rs. 772.5 as service tax in the invoice. It should show separately the amount of Basic service tax, edu cess and higher secondary cess and should fulfill other conditions specified in Rule 4A of Service Tax rules, 1994 related to format of Invoice to be raised.

Cenvat credit :

Cenvat credit of 25% can be availed by the service receiver on receipt of invoice and of remaining 75% can be availed as soon as he pays off his liability under partial reverse charge.

Experts, please correct me if i am wrong me.

Thank you !

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CA. Narottam Kumar Rawat (Indirect Tax Consultant) (394 Points)
Replied 08 November 2013

Everything is correct. However, I would like to inform that Service tax under reverse charge on "Supply of Manpower" and not on "recruitments". These two are different please dont consider the same.

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Sidharth (Article Assistant) (80 Points)
Replied 08 November 2013

Thank you for your feedback Mr. Kumar.

I wanted to know whether the above case falls under supply of manpower or Manpower recruitment ?

CA. Narottam Kumar Rawat (Indirect Tax Consultant) (394 Points)
Replied 08 November 2013

I can not write much on Blogs but a simple criteria you may apply in case employees under the payroll of service provider and service recipient has right to give any work then it will be a contract "for supply of Manpower". However, you are just introducing them and later employee work under payroll of service recipient then this will fall under "Manpower Recruitment services"

Sidharth (Article Assistant) (80 Points)
Replied 08 November 2013

Thanks a lot Mr. Kumar !

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NIRAV (CA) (62 Points)
Replied 09 November 2013

Thanks you all for replying and guiding and for valuable feedback.

I would also like to know that in this case the service provider would be barred from taking Cenvat Credit of Service Tax paid by him on Telephone Bills, Internet etc.?????????????