Abhishek (article clerk) (38 Points)
19 May 2009Service Tax is paid by service provider after collecting it from Service Receiver. However in case of import of service, service receiver himself is liable to pay service tax. My queries are that,
1. At which point of time tax is payable to government i.e at time of receiving service or at the time of actual payment.
2. Is there any set-off available for the tax paid.
Krishan
(Service)
(633 Points)
Replied 19 May 2009
According to my knowledge:
Service Tax is to be paid by service service receiver when it pays for the expenditure. as just payee party has been changed not the time. when service provider will receive the money, then in place of him/her we( service receiver) will pay to the government.
2. Is there any set-off available for the tax paid
ya, it will be input service for the service receiver and credit must be allowed. but while paying service tax for this service no credit can be used.
Abhishek
(article clerk)
(38 Points)
Replied 19 May 2009
| Originally posted by :CA KRISHAN | ||
| " | According to my knowledge: Service Tax is to be paid by service service receiver when it pays for the expenditure. as just payee party has been changed not the time. when service provider will receive the money, then in place of him/her we( service receiver) will pay to the government. 2. Is there any set-off available for the tax paid ya, it will be input service for the service receiver and credit must be allowed. but while paying service tax for this service no credit can be used. |
" |
Thank you sir.
But I had a doubt.
The service tax we pays Is over and above 100% of the Expenditure amount. So it will be our Expenditure which we should charge to P&L A/c.
Further, It is our liability which we pay to the government. And on other hand if we take set off government will receive that much amount less. So one one hand government is receiving Money and other hand it is loosing money. So I am confused that set off can be taken or not.
Krishan
(Service)
(633 Points)
Replied 19 May 2009
look take a example
service charge: Rs. 1000
Service tax: @ 10.3: Rs. 103
this service tax is charged by service provider and paid to government, then service receiver will take the credit. is it OK
if liability to pay service tax is levied on service receiver and he is paying then why he should not be allowed to take credit?
so credit will be allowed.
mukund
(Artical Assisstant)
(33 Points)
Replied 19 May 2009
Import of Services
The statutory provisions use the words ‘Services provided from outside
Section
Exemption to individual receiving the service - First proviso to section
When service provider has establishment at more than one places - Second proviso to section
Two permanent establishments to be treated as two separate persons - As per section
Intention seems only to tax services received in
Service provided from outside India and received in India - Though scope of section
Classification of services - The rules classify all taxable services in four categories, namely (i) Services in relation to immovable property – the property should be situated in India – rule 3(i) (ii) Services should be at least partly performed in India [rule 3(ii)] (iii) Services received by recipient located in India [rule 3(iii)] (iv) Services which will never be treated as import of service. The classification is same as per export of Service Rules.
Service receiver liable to pay service tax - As per rule 2(1)(d)(iv) of Service tax Rules, person liable for paying the service tax means - in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under section
Thus, person receiving service in
Tax to be paid in cash without Cenvat credit - Rule 5 of Taxation of Services (Provided from outside India and Received in India) Rules, 2006 clarifies that the taxable service will not be treated as output service of the recipient for purpose of availing of Cenvat credit of duty of excise paid on inputs or service tax paid on any input services. Thus, the recipient of service has to pay the service tax in cash by TR-6/GAR-7 challan. He cannot utilise his Cenvat credit for payment of this amount, as it is not his ‘output service’, though he is liable to pay service tax.
Service receiver avail Cenvat credit of service tax paid by him - Though the person receiving the service is liable to pay service tax, the service is his ‘input service’.
Abhishek
(article clerk)
(38 Points)
Replied 19 May 2009
Thank you Sir and thanks a lot Mukund- Abhishek
Madhukar N Hiregange
(Chartered Accountant)
(39034 Points)
Replied 19 May 2009
What you have observed that on one hand you pay and on the other you avail the credit is true that it seems pointless. However all the importers of services would not be paying the service tax or central excise duty ( non taxable services, exepmted product manufacturers// traders) and therefore the mechanism exists.
To simplfy the same an exemption could have been provided when the manufactures/ service provider who pays ST are exempted.
Analysis of 20 GST Notices (including 2 Appeals) and Practise on Drafting(with recording)
CAclubindia
