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Service tax reversal mechanism in execution of work contract

rahul somani (Article) (36 Points)

19 June 2013

Sir/Mam , As per the latest notification on 1.07.2012, ST would be charged on 40% of the bill assuming that 40% to be the part of service and both the service provider and service receiver will pay 50% to govt ... i have a doubt that if the service provider collects from us 100 % of ST and deposits to the govt , is our liability waived off or we will still have to pay and the excess payment we made will be setoff in the upcoming return ?

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CA girl (Article Trainee-CA Final) (1942 Points)
Replied 19 June 2013

Hey

As per the rule the service receiver has to pay his share of the service tax liability mandatorily. The fact that he has already paid the entire 100% of ST to the Service provider does not absolve his liability. However you will get credit for that 100% tax paid directly to the service provider.

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Brajesh gautam (student) (232 Points)
Replied 19 June 2013

one of our Transporter load the goods from factory & offload the same in client's side and raised invoice ( Builty ) in which no service tax is charged while he is registered with service tax deptt. having turnover about 40 lacs and on invoice , transporter mentions that Service tax paid by the party.

mu query is this , do I need to deposit the service tax or transporter will deposit the same. will I need to change in the service tax registration.

thanks in advance

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Ganeshbabu K (Audit and Tax Advisory) (48564 Points)
Replied 19 June 2013

1)Legal liability is of service receiver.

2)That liability does not disappear even assuming that the service provider has paid the service tax.

3)The department can insist on payment of service tax from you [In respect of past, may be you can get away by claiming that it is only procedural mistake and no revenue loss. However, for future, please do not do it].

Thanks & regards

Ganesh babu k

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