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Service tax- reverse charge

jigar Shah (Auditor) (28 Points)

07 April 2014

Hello Friends, I hv query for reverse charge. manpower service provider providing services for Rs. 600000 in first year of business. So do he require to pay tax on his portion of 25% or else can get benefit of exemption limit of 10 lacs as this is his first year of business.

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9 Replies

Deepak Gupta (CA Student) (15922 Points)
Replied 07 April 2014

Originally posted by : jigar Shah
	Hello Friends, I hv query for reverse charge. manpower service provider providing services for Rs. 600000 in first year of business. So do he require to pay tax on his portion of 25% or else can get benefit of exemption limit of 10 lacs as this is his first year of business.

The liability of the service provider and service recipient are different and independent of each other.
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Service provider can avail exemption owing to turnover being less than Rs. 10 lakhs. He shall not be obliged to pay any tax.
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However, the service recipient shall have to pay service tax which he is obliged to pay under the partial reverse charge mechanism.
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Para 10.1.3 of Taxation of Services: An Education Guide published by TRU-CBEC

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Akshay Garg (Indirect tax trainee) (457 Points)
Replied 07 April 2014

Dear Jigar

The query raised by you is regarding the sevice provider who can avail the benefit of the threshold exemption limit as the service provider is liable to pay service tax only after crossing the limit of threshold exemption.

In case of the recipient the receiver is liable to tax under reverse charge and there is no exemption limit.

Concept of reverse charges and service tax payable by service provider are indepent of each other.

vinay mehta (student) (80 Points)
Replied 07 April 2014

What I have a query is when provider is availing the exemption why would he charge service tax in his invoice and since he wont why the recipient would need to pay?

Sandeep Mangal Agarwal (Chief Accountant) (199 Points)
Replied 07 April 2014

Dear Vinay, You have two questions. Answer is when service provider is liable to pay service tax then he would pay only except if the service is exempted under law.If service provider is liable to pay service receiver can't pay. Again if service liability is on provider and service is exempt then receiver is also not liable to pay as the service is exempt. Again if service is exempted then provider can't collect service tax on it's invoice if he collect he is liable pay even if receipt is below exemption threshold. service receiver is liable to pay tax only on 12 services as yet. The liability may be partly on service provider and partly on service receiver or on service provider only or on service receiver only depends on the kind of service.

Vivek Khakhkhar (Assistant Audit Manager) (201 Points)
Replied 08 April 2014

as per notification no. 30/2012 liability of service provider & receiver is independent of each other. The benefit of threshold limit not available service receiver. So 75% of service tax liability has to be paid by service recipient. Because there is no monetary limit of exemption when service tax is discharged under reverse charge mechanism.

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Sumit (Article) (25 Points)
Replied 08 April 2014

Irrespective of service provider mentioned service tax on invoice or not recipient is liable to pay service tax on reverse charge .

CA PRIYUL SHAH (JOB) (901 Points)
Replied 22 May 2014

Limit of of Rs.10 lacs is irrelevant for liability under reverse chage mechanism

vishak (accounts) (488 Points)
Replied 24 October 2014

Sir What Is The Latest Changes In Recovery Service Provider Service Tax ?Pls give notificatio & seriel no

k K Sarawagi (Others) (24 Points)
Replied 30 October 2014

The liability of the service provider and service recipient are different and independent of each other. The payment of service tax in respect of Manpower Supply and security services in case of service provided by Individual, HUF, Proprietary firm, Partnership firm to a business entity registered as a body corporate is 25% by the service provider and 75% by the service receiver. However, in respect of Manpower supply and security services, service provided by a company, Body Corporate, Society, trust, AOP or BOI to any person, it is the service provider who has to pay 100% service tax.

Thus, in case the service provider is availing exemption owing to turnover being less than Rs 10 Lacs, he shall not be obliged to pay any tax. However, the service provider shall be required to obtain registration as soon as his annual service turnover of Rs. 9 Lacs is achieved.

In case of service recipient who is required to pay service tax on partial reverse charge basis, shall have to pay his part of service tax i.e. on 75% of the gross amount even if his turnover is less than Rs.10 Lacs.

In case of a business entity registered as a body corporate required to pay service tax on reverse charge basis, shall be required to obtain registration under service tax even if its threshold exemption limit does not exceed Rs.10 Lacs.