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Service tax under reverse charge

Nishant Mittal (ACA, ACS) (Service) (29 Points)

25 October 2012

Dear friends,

I have a query regarding service can, can anybody reply??

We have got painting work done from a contractor in an immovable property, the bill amount is approx. 11 lacs. The contractor has not levied any VAT in the invoice raised on us. Now just want to know do we have any liability to pay service tax under reverse charge under "Works Contract Service".

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8 Replies

(Guest)

Yes,

in case where the service provider is non corporate entity and recipient is corporate entity the reverse charge machanism applicable in case of work contract service

the 50% is of recipient liability and 50% is of the service provider liability.

Thanks

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Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 25 October 2012

Case 1:

If the painting material(i.e. paints, primer) are made available by the Service receiver, then it shall be considered as pure labour contract. Hence, no Work contract in this case.

Case 2:

If the Service provider brings the painting material of his own & charges consolidated bill for material & labour(though he doesn't charge VAT/CST),then the same shall fall under Works contract and thereby resulting in 50% service tax liability of the sevice receiver.

1 Like

ritesh patel (SR.ACCOUNTANT) (69 Points)
Replied 25 October 2012

dear,

my query is regarding payment of service tax ,

50% of service tax borne and paid by service provider and 50 % of service tax borne and paid by receiver , being corporate.

1)Now , the corporate should apply for service tax no. in order to pay the S.tax or can pay directly to govenrment.?

2) Also corporate needs to file ST 3 , as applicable to others?

C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 25 October 2012

Yes have to apply for ST No & also need to file ST3 if he wants to take credit of said ST paid.

Ravi Nallipogu (Student ) (128 Points)
Replied 25 October 2012

Execution of Works Contract

Any Person other than corporate entity

receiver

Body Corporate

50%

Valuation of works contract Notification No 24/2012-ST dated 6^th june ,2012

Movable property :

Execution of Original work is 40%

Maintenance or Repair is 70%

Immovable Property :

other than above work is 60%

provider

Corporate entity

100%

NIL

As per Valuation of works contract Notification No 24/2012-ST dated 6^th june ,2012 66E (h) Service portion in the execution of a works

contract.

With effect from 01-07-2012, the following

definition of “Works Contract” as given in Section 65B

(54) of the Act is applicable:

"works contract" means a contract wherein transfer

of property in goods involved in the execution of such

contract is leviable to tax as sale of goods and such

contract is for the purpose of carrying out construction,

erection, commissioning, installation, completion,

fitting out, repair, maintenance. renovation, alteration

of any movable or immovable property or for carrying

out any other similar activity or a part thereof in

relation to such property;

A perusal of above definition reveals that scope

of works contract has increased immensely. The

most striking feature of the above definition is

that it applies to both movable and immovable

properties.

Exemption to certain Construction Activities

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Sonu Kumar (Account Manager) (665 Points)
Replied 25 October 2012

I think It will Come Under Work Contract and U r Liable to Pay Service Tax... Reverse Charge will be Applicable... For More Please Visit This Link

/articles/reverse-charge-mechanism-of-service-tax-14673.asp#.UIk5929th0c

Nikita Agarwal (CA) (43 Points)
Replied 29 October 2012

Originally posted by : nishant

Dear friends,

I have a query regarding reverse charge mechanism, can anybody reply??

What if service tax has been paid by service provider instead of service receiver in case of goods transport service where reverse charge mechanism applies?

What will be the liability of service receiver in such case?

Please guide me.

Himanshu (Student (CA Final)) (24 Points)
Replied 01 December 2012

Rakesh Sir u r contradicting Sumit Sir ..
Please tell guys who is correct...?

Whether in above case (merelly service provided without VAT charged in bill ) Service tax liability under works contract (reverse charge) incur or not..???