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Payment of service tax under partial reverse charge

abhishek joshi (article) (24 Points)

28 December 2012

I AM A WORKS CONTRACTOR PVT LTD COMPANY AND I HAVE GOT A WORKS CONTRACT. THE SAME HAS BEEN SUB LET TO ANOTHER WORKS CONTRACTOR WHICH IS A PARTNERSHIP FIRM. SO UNDER, THE REVERSE CHARGE MECHANISM, I HAVE TO PAY 50% LIABILITY OF SERVICE TAX.

PROBLEM: FOR PAYMENT IN GAR 7 CHALLAN, DO I HAVE TO MENTION THE NAME OF THE SUB CONTRACTOR ON WHOS BEHALF I AM PAYING THE SERVICE TAX?

ALSO, I HAVE MADE THE PAYMENT TO MY SUB CONTRACTOR ON 22.12.12 AS AN ADVANCE. THE SUB CONTRACTOR HAS NOT ISSUED ME ANY INVOICE NOR HAS THE WORK STARTED.

SO DO I HAVE TO IMMEDIATELY PAY THE SERVICE TAX PORTION ON THE 6TH OF JANUARY 2012 ?

PLS REPLY

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2 Replies

rohit (Article) (61 Points)
Replied 27 November 2013

Abhishek,

For your two questions

There is no coloumn to mention partie's name in GAR 7 challan.
Since at present, Service Tax is on Receipt or Accrual basis whichever is earlier, Service Tax liability arises as soon as the other party receives the payment

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Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 27 November 2013

1. Under reverse charge, you are not paying tax on behalf of another. Infact it your own statutory liabilty under section 68(2). So in GAR-7 mention only your name.

2. Sub-contractor should issue invoice/bill of challan within 30 days of receipt of advance as per Rule 4A of STR, 94. As per Rule 3 of POTR, 2011 point of taxation is date of issue of invoice or date of receipt of payment, whichever is earlier.

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