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TMI BlogValuation of Service on manpower Recruiting AgencyX X X X Extracts X X X X X X X X Extracts X X X X ..... Dear Learned Friends , Please give your valued clarification to the two follwing queries 1) A labour Contractor deploys workers; say 100 persons to a Company(the Principal Employer) and raises two Bills for theservice rendered in the following fashion: Bill No:1) Submits for Service Charges/Commission say @ 25% on Wages (as per Statutory Minmum wages or agreed mutually agreed wages) @ Rs.4000/ p.m per worker for 100 persons -Rs.4,00,000x25/100 = Rs,1,00,000/- BillNo:2) Submits a seperate bill towards the wages paid to the workers for Rs.4,00,000/- and for the Statutory PF ESI (Employers' Contribution)@12% and 4.75% respectively for Rs.67,000(PF@12% ESI @4.75% on Rs.4,00,00 i.e -Rs.48,000+Rs.19,000) towards the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove said Statutory Contributions paid for the workers employed by him, which the company as the Principal Employer reimburses to theContractor. My query is, if the Contractor collects service [email protected]% on Rs.1,00,000 i.e his Bill towards Service Charges or Commsision; by whatever name they are called (1,00,000x12.36%) and remits the same i.e. Rs.12,360 to the Department , will it amount to compliance on the part of the contractor(Service Provider) as per Service Tax Rules? Only the Service charges/commission goes to his,Pocket ; the wages go to the workers employed and the PF ESI contributions go to the Authorities Concerned. 2) if the company deducts tax at Source(TDS) on Rs.12,360 at the applicable rate and remit to IT, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it be construed that the Company as the Deductor has complied with the rules concerning TDS Note: The Contractor by undertaking similar service with other companies thus earns more than the Small Scale Service Provider Exemption Limit of Rs.10,00,000/- and has duly taken Registration under Service Tax and holding PAN Card. Kindly clarify. Thanks With Regards, K.Srivatsan - Reply By sv bhasker - The Reply = Sir, Service tax is payable on the sum total of all components like commission, wages,PF and ESI. - Reply By Pradeep Khatri - The Reply = Service tax will be calculated on the Gross Value of the Bills duly submitted. - Reply By Dilip Darji - The Reply = Dear Sir. When Service Provider incurrs certain expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses on behalf of Service Receiver and getting reimburshement from Service Receiver, such expenses does not form part of taxable services and not liable to Service Tax. Only thing is that it needs to be mentioned in the invoice that it is a reimburshement of expenses incurred on behalf of Service receiver. Service Tax is payable only on amount received in relation to taxable service. The charges is on any taxable service provided or to be provided. Thus if any amount is charged which is not towards taxable services, it is not liable to service tax. Wages, PF and ESI of the employees paid by you is a pure reimbushement of expenses incurrred by you on behalf of Service Receiver and therefore not liable to Service Tax. - Reply By Srivatsan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Krishnamachari - The Reply = Dear Gentlemen, Thanks for your response to my Query (Issue ID: 4316). The view expressed by Shri DiliP Darji is in tandem with that of mine. My view is ,when the Contractor(Manpoer Agency) produces bills/challans to vouchsafe the payment made by him towards wages Statutory levies like PF ESI for getting them reimbursed by the Principal Employer, it does stand outside the perview of Taxable Service( for Valuation of Service) Thanks With Regards, K.Srivatsan - Reply By Jagdish Mehta - The Reply = You can exclude reimbursement of expenses only if these are incurred in your name. If they are incurred in your name, then it will follow that contractor is your agent and contractual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees are your employees. Obviously, this can defeat the purpose. Regards, J A Mehta - Reply By Rajesh Sharma - The Reply = I don't agree with the Darji's views, as you have to pay ST as per the Rules and the Rules says whatever ST has to be paid on Gross value and the Gross value is what you get and which is defined in Section 67 of the Act. Therefore, ST has to be paid on Gross value which includes EPF, and all other charges you are getting from the service receiver. - Reply By sv bhasker - The Reply = Sir, I am in agreement with the frank and correct legal position explained by Mr.Rajesh Shrama. It appears that learned Mr.Srivatsan Sir wants to endorse the views that are similar to his views irrespective of the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tents in the provisions of Section 67 of FA . - Reply By SANJAY GUPTA - The Reply = Dear Gentlemen pl refer to MF(DR) circular no B1/6/2005 -TRU dt 27.7.2005 ,sevice tax to be charged on full amount of consideration for supply of manpower ,whether full time or part time.The value includes staff costs from the receipient eg salary and other contribution.Even if the salary is paid directly by service receiver to the individusl workman , it will still form part of value of taxable services. Regarding TDS also refer to circular no 715C dt 8th august 1995 - Sec 194C refers to any sum paid .Reiumbursement can not be deducted out of the bill amount for the purpose of TDS. - Reply By Dilip Darji - The Reply = Dear Sir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CESTAT in case of Commissioner vs Malabar Management (2007 (10) TMI 135 - CESTAT, CHENNAI) = [2009 (9) STR.483-CESTAT-Chennai] has observed that actual reimbursement of expenses to service provider cannot be terms as an amount charged by Service Provider. Dept. had filed an appeal against such an order before Supreme Court [2010(19)STR-J.16 (SC)] which has been admittted in Supreme Court and still pending decision. Pending decision of SC, CESTAT order is in force. - Reply By SANJAY GUPTA - The Reply = Dear Sir There are other citation on the contrary viz Shri Bhagvathy Traders Vs CIT , (2011 (8) TMI 430 - CESTAT, BANGALORE)= Cochin(2011) CESTAT Banglore I would advise if prinicpal employer is in a position to claim cenvat cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit , it is better to pay service tax on Gross amount insted of going into costly litigations thanks - Reply By Dilip Darji - The Reply = Thank you so much Sir. - Reply By Srivatsan Krishnamachari - The Reply = Thank you all Learned Friends K.Srivatsan - Reply By SAURABH SHUKLA - The Reply = Now, wef 1/7/2012 Manpower supply services is covered in reverse charge. - Reply By SANJAY GUPTA - The Reply = But now question arise if services provided in June (Prior to July) , bills raised and payment released in July ,whether service tax to be discharged by service provider or service receiver partly.Under reverse charges mechanism , the Point of taxation shall be date of payment.ref deptt circular dt 31st March 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . - Reply By Srivatsan Krishnamachari - The Reply = Dear Sir, Since the new rule is with effect form July 2012 as per the notification no 30/2012 , issued in the last Month inthis regard , the 75% liability on the part of te Service Reveiver under reverse charge mechanism is only from July 2012 for which the payment of tax to be made on or before 6th of August, 2012. This is my underestsnding. Regards, K.Srivatsan - Reply By Jagdish Mehta - The Reply = Service-tax is not attracted if atleast two activities are performed before 1st July 2012 Provision of service Raising of invoice Receipt of payment Hence, you need to have invoice dated prior to 1st July 2012 to avoid service-tax. Regards, J A Mehta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Reply By SANJAY GUPTA - The Reply = Dear sir SP has 30 days to raise invoice .moreover if they raise invoice on 30th June , they will be liable to pay full tax.The issue is reverse charge mechanism regards - Valuation of Service on manpower Recruiting Agency - Query Started By: - Srivatsan Krishnamachari Dated:- 30-6-2012 Service Tax - Got 17 Replies - Service Tax - Discussion Forum - Knowledge Sharing, reply post by an expert, personal opinion Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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