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Service tax liability for project management

30 August 2014

Hi,

I am being offered a senior program management role by a IT company, on a retainership contract for a fixed period for a fixed amount. My questions are:

1) Should I be charging a service tax? Please note I am not registered for service tax as this will be my first contract assignmnet. i have been on salaried employement so far.

2) Should I need to raise an Invoice or sould the company include service tax componenet as part of my fees and deduct the same before paying me?

3) Will there be a professional tax (TDS) of 10% over and above service tax?

4) Please let me know how the calculations will be made if my fees fixed (as an example) is say 1.5 lakhs per month nett?

Kindly respond ASAP as my commercial negotiations is yet to happen.

Thanks

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5 Replies

Venkatanarayana GM (Partner associate at Hiregange & Associates) (1279 Points)
Replied 01 September 2014

Dear Netizen,

Refer basic definition of "Service" which excludes that "a provision of service by an employee to the employer in the course of or in relation to his employment". (Refer Section 65B of Finance Act 1994.)

Now in your case your not acting as an employee. Hence, service tax is applicable for the services rendered by you to the company.

However, please note that you have an basic exemption limit of Rs. 10 lakh (Please refer 33/2012 Service tax)

Further, if you don`t want to avail this basic exemption, you can register with ACES online and collect service tax from the company (Raise invoice).

Please remember that, you can avail input service as well i.e is to say you can set off input service tax paid againist your output liability like Internet services, Telephone services etc:-

For registration documentation & procedure, pl mail your e - mail id. I will share with you.

Thanks

Venkat

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Ramachandran R S (CIO) (58 Points)
Replied 01 September 2014

Thank you for your response. I will not be availaing the exemption. My email id is ramshaila @ gmail.com. I will like to register for service tax and collect tax by raising invoice for me fees.

Let me know if the TDS deducted by company should include the service tax amount or exclude?

Rgds

Venkatanarayana GM (Partner associate at Hiregange & Associates) (1279 Points)
Replied 01 September 2014

Service tax to be charged on "Gross Amount charged"

So, No deduction for TDS is available. Hence, the same is to be included.

Thanks

Ramachandran R S (CIO) (58 Points)
Replied 01 September 2014

I am aware that ST has to be on the Gross Amount charged, what I meant was if I raise an invoice for say 1 lac and the ST is 12.36% of this, so the total value of Invoice comes to 112360. Now will the service receiver , deduct 10 % TDS on 1 lac (as that is the service provider's fees) or on 112360 ? What will be my net receivable and how much I have to deposit to government for ST in thsi case?

I will soon send the documents to you. Thanks