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Calculation of service tax under & reverse charge mechanism

Girish C.A. Final (Student CA Final ) (33 Points)

15 September 2012

Hi, Please clarify me on below..........

Nature of work: Work Contractor (supplying material and labour to builder)

Where MVAT and service Tax is applicable, bill detail as follow,

Bill amount Rs. 560000/-(Material plus labour)

Tax Treatment

Bill Amount = Rs. 560000/-

VAT. @ . 5% = Rs. 28000/-

Service Tax @ 12.36% = 69216/-

Total = 657216/-

My question is how we calculate above Service Tax under “Reverse Charge Mechanism” effective 1st July 2012.

Thanks in advance for your quick reply

Regards

Girish

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10 Replies

CA Navin Jain (MANAGER (FINANCE & ACCOUNTS)) (11768 Points)
Replied 15 September 2012

if supplier is individual/huf/ firm and receiver is a body corporate then reverse charge applicable.

if above condition is fulfiled then PAY 50% ST to contractor and deposit 50% st under reverse charge.

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Girish C.A. Final (Student CA Final ) (33 Points)
Replied 15 September 2012

Yes Sir, supplier is individual and receiver is corporate but the bill has been generated by supplier like below.

Bill Amount = Rs. 560000/-

VAT. @ . 5% = Rs. 28000/-

Abetment of 60% has been taken by supplier (560000*60%)=224000*12.36%/2=13843/-

Total Bill amount =601843/-

Is this is the correct method. And they also have charged service tax @ 2.472% some other bill like above sales,

Please clarify me sir………

CA.Vinita Gupta (Deputy Manager- Finance) (2923 Points)
Replied 15 September 2012

In case of Jobworker it is 50% by Service Provider and 50% by Service Receiver . The Service Receiver if its a Company and Service Provider if its individual /huf, aop........ then Service Receiver has to deposit 50% to the service tax department by 5th in case of manual / 6th in case of online payments of the next month ( say bill of Aug) amt to deposited by 5th/ 6th sep

Sandeep (Accountant) (33 Points)
Replied 16 September 2012

I think the question is not about the %, as far my understanding he trying to know whether the above calculation is correct or not, please correct me if i'm wrong.

regards

CA Navin Jain (MANAGER (FINANCE & ACCOUNTS)) (11768 Points)
Replied 16 September 2012

@ girish calaculation is right, and service receiver also liable to deposit service tax of Rs,13843 under reverse charge.

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CA Navin Jain (MANAGER (FINANCE & ACCOUNTS)) (11768 Points)
Replied 16 September 2012

@ Vinita, Reveres charge is not applicable on job worker its applicable on work contract.

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CA.Vinita Gupta (Deputy Manager- Finance) (2923 Points)
Replied 16 September 2012

Thank you Navinji for correcting me its applicable on works contract not job worker

Tejas Shah (Deputy Manager ( Finance & Accounts )) (211 Points)
Replied 17 September 2012

Hey Girish

The bill generated by the Service provider is 100% correct.

Under Work Contracts Composition Scheme 60% Abadement is allowed on the basic value of Contract. But the above amount shall include any value of material supplied free of cost by the Service Receiver to Service Provider. So the actual percentage of Service Tax Charge works out as 100*0.4*12.36%= 4.944 %. And under reverse charge method 4.944/2 = 2.472 % is the liability of Service receiver. So the invoice provided by the Service provider are correct in Amount. The method of disclosure may vary from person to person.

Moreover please also remember to deduct 2%VAT TDS if the contract is Civil Contract apart from normal Income Tax Tds rate.

Regards

Tejas Shah