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Reverse charge payment

Pankaj Arora (Learner) (3134 Points)

11 January 2016

Hi...

We have received a manpower bill for Rs. 1 Lac in September 2015.

I have following queries regarding this:-

1) if we pay above bill in the month of December than from which date our liability will start and if we don't pay than from which date interest on late deposit service tax start?

2) if we pay after six months than how we will record liability in our books?

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2 Replies

Nagendra Hegde (Chartered Accountant) (1948 Points)
Replied 11 January 2016

As per POT, Rule 7, ST liability would ariase on making payment to party if u make the payment within three months from the invoise date.

If the payment is not made within 3 months to service provider, then your liability would arise immediately the next day. i.e 91st day.

If you pay after 6 month, you can record only payment entry. ST liability entry should have been made on reaching three months itself.

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Arpit verma (Indirect tax) (1372 Points)
Replied 14 January 2016

Supply of manpower or security services

Services by way of supply of manpower for any purpose or security services.
Service provider may be an individual, HUF, partnership firm or AOP.
Service receiver should be a business entity registered as body corporate.
Service provider and service receiver should be located in taxable territory.
Liability of service receiver is 100% of the amount of service tax.
Not applicable when service provider is a body corporate.
Point of Taxation – Date of Payment of invoice or 3 months from date of invoice - whichever is earlier.
Service tax paid on reverse charge also eligible for cenvat credit on the strength of challan.
Service tax payable on reverse charge cannot be paid through cenvat credit a/c.
Whether the benefit of Exemption for Rs. 10 lakhs available to service receiver - NO, It will not be applicable to assessee paying service tax under reverse charge mechanism (N.No.33/2012).

thanks & regards

Arpit Verma