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Reverse charge query

Faraz (Student) (236 Points)

29 January 2014

A Company is availing services of GTA. The GTA sends its bill charging service tax on 100% of the amount. The Company is not recognising its liability under reverse charge mechanism for availing GTA services. There is no specific contract between GTA and the Co. Is this the right practice?

Eg. Bill amount=10000
ST @ 12.36%=1236
Total bill amount 11236 send by GTA to Company

According to me, in case of a GTA, liability to pay ST is not of the provider in any case. It is either 25% if the provider gives a certificate or specifies on his bill that he is not availing cenvat credit, or it is 100% is no such declaration is made. In both cases, receiver is liable to pay ST. However, the company is not recognising its liability under RCL saying there is no revenue loss to the government. If this is right, why was RCL brought?

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7 Replies

Sindhuja (Final Student) (113 Points)
Replied 30 January 2014

In such a situation does the company has the liability to pay service tax under reverse charge, even after setteling the GTA including service tax portion

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VIKASH KUMAR JAIN (Audit Executive) (711 Points)
Replied 30 January 2014

Service tax liability of SR and SP are independent of each other.

KCJM and Associates (Chartered Accountants Firm) (864 Points)
Replied 31 January 2014

In our opinion, the resolution of your query is as under:

In case of reverse charge mechanism, services availed from GTA are taxable to the service receiver and therefore it becomes liability of the service receiver to pay service tax. In present case, the company should record the liability being the receiver of service from GTA. But, if the payment is made to GTA along with the amount of service tax and GTA has in turn made payment of service tax to the Central Government as service provider than, the company can rely on the judgment of CESTAT, Ahmedabad BENCH in the case of Angiplast (P.) Ltd v/s. Commissioner of Service Tax, Ahmedabad where it is held that:

Even in case of reverse charge mechanism, when the service provider has paid the service tax to the Government, then service receiver shall not pay service tax on the same amount for which the service provider has already made the payment to the Central Government as it would amount to double taxation, provided that proper documentary evidences are maintained for the same.

However, as the responsibility to pay service tax is on the company as service receiver under the reverse charge mechanism, another option available with the Company is that it can ask GTA to raise an invoice without service tax on which the Company (service receiver) shall pay service tax directly to the Central Government either on 100% or on 25% of invoice amount, as the case may be.

Dhruv Shah, Tax Solutions Executive, KCJM
https://www.kcjm.in/

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 01 February 2014

Agree with KCJM..

For more details regarding service tax on GTA, you may read my article as below:

https://www.caclubindia.com/articles/service-tax-on-gta-a-guide-19063.asp

Hemant Bharat Zambare (Accounts Executive) (21 Points)
Replied 10 February 2014

Hi,

I have a query related to service tax reverse charge mechanism on Supply of Manpower services.

One of our vendor (Firm) supplying the manpower (skilled) on contract basis. The contractor comes to our premises & provide services in a specific area. Do we need to pay service tax on the basis of reverse charges mechanism?

Pls suggest what can i do. (& case law if any)

Thanks,

Hemant Z.

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Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 10 February 2014

@ Hemand If you are a body corporate, then you are liable to discharge 75% of Service Tax on Value of Manpower Service, otherwise not.

KCJM and Associates (Chartered Accountants Firm) (864 Points)
Replied 10 February 2014

The table below shall illustrate various situations for Service Providers / Service Receivers taxability in case of Manpower Supply Services:

Service Provider	Service Receiver	Superintendence & Control	Tax Liability of Service Provider	Tax Liability of Service Receiver
Individual, HUF, P’ship Firm or AOP	Body Corporate	Provider	100%	NIL
Individual, HUF, P’ship Firm or AOP	Body Corporate	Receiver	25%	75%
Body Corporate	Individual, HUF, P’ship Firm or AOP	Immaterial	100%	NIL
Individual, HUF, P’ship Firm or AOP	Individual, HUF, P’ship Firm or AOP	Immaterial	100%	NIL
Body Corporate	Body Corporate	Immaterial	100%	NIL

Kindly note that the Reverse Charge Mechanism becomes applicable only when the Service Provider is Individual, HUF, P’ship Firm or AOP and the Service Receiver is a Body Corporate.

The threshold limit for the exemption of Rs. 10 lacs is available to the Service Provider providing the services. However, such exemption is not available to the Service Receiver who is liable to pay service tax under Reverse Charge Mechanism.

Dhruv Shah, Tax Solutions Executive, KCJM

https://www.kcjm.in/