One of the leading construction cos. of our country located in NOIDA is in regular practise of holding of service tax charged by their sub contractors in their RA bills and releasing the same amount on production of service tax challans deposited by sub cont. Although it is a good practise,but I wanted to know the legal validity of this.
Gautam Joshi
(Partner)
(361 Points)
Replied 18 November 2009
Hi Atir,
Good observation! Service Tax, being an IDT levied on Service Provider who is restricted to collect any other amount in th name of or in excess ST but there are no restrictions of holding ST like what you said. On the contrary, Company is forcing such Service Providers to pay ST even before the receipt of the same which ultimately results into early ST collection by Government. (Otherwise the same ST would have been paid by Service Provider once on receipt basis which is legaly supported as well) Though moraly, there is an extra burden on the part of Service Provider who is at one side not collecting anything (upto 10% of retention or whatever terms) and other side paying ST liability on it in advance and getting it reimbursed on showing challans)
From Company's point of view I would say it is better complying their statutory due's policies.
This will make you clear that why is Government liberal in such practices.
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