Reverse charge mechanism

Queries 1559 views 5 replies

Aman

Finance Professional

604 Points Posted on 05 July 2013

Dear All,

I have some questions relating to reverse charge of service tax.

Q1. If service provider turnover is less than Rs.10 lakhs & he does not charge any service tax in his bill, then in what way liability of service receiver will generate? is receiver is liable to pay service tax?

Q.2 Our Co. has hired a car. When it receives the bill there was service tax only 4.944% .i.e. 40% of 12.36% & we pay him including this amount & he filed his service tax return itself for 40% amount only. Is this correct? The 40% in fact is the liability of service receiver & remaining 60% is exempt for service provider, as per rules. Then in this what will be the consequences? Is there is no libility of service receiver as he already pay his part of service tax i.e. 40% of service tax.

Please clarify me & give me best advise/solutions in this regard?

Replies (5)

Bhawana

666

38 Points Posted on 05 July 2013

1st Answer: Basic exemption limit of Rs. 10 lacs is not available in case of liability to pay service tax under reverse charge.

Service receiver is liable to pay tax from first rupee of services received.

2nd Answer : In case of Renting or hiring of motor vehicle designed to carry passengers, to any person who is not in the similar line of business

The service Tax on 40% of value will be paid by the service receiver and Nil by service provider. Thus, service receiver is liable to pay service tax only on 40% value. In such case, Service Provider should be HUF, Individual, firm and Service receiver must be company. If service provider and service reciver both are company then reverse charge is not applicable.

aman, your company should take service tax challan from that individual and instruct him to file service tax of that quater/halfyear.

sanjay singhal

987 Points Posted on 06 July 2013

Agreed for 1 st answer. In case of second answer under RCM it is liability of service receiver to pay tax. Department may ask him to pay tax. Even if same has been deposited by service provider.

Aman

Finance Professional

604 Points Posted on 08 July 2013

Thanks both of u....

Sweta agarwala

student

48 Points Posted on 11 July 2013

1.when person receiving service is liable to pay service tax under reverse charge,he is not entitled to exemption which is available to a small service provider.thus the service receiver is liable to pay service tax even if value of service of service provider is less than RS ten lakhs.even if service provider does not charge service tax in his invoice,the service receiver is still liable to pay his part of service tax.

Sweta agarwala

student

48 Points Posted on 11 July 2013

2.yes it is correct.when a business entity registered as body corporate located in the taxable territory then tax liability is 40% of value by service receiver and nil by service provider.If the service provider intends to avail Cenvat credit,it can pay service tax on balance 60%.