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payment of service tax on reversed charge method., Service Tax |
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payment of service tax on reversed charge method. |
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Some of our service providers covered under works contracts were not crossed the turnover limit of Rs. 10 Lacs in previous financial year 2011-12. Hence, they have not taken any service tax Registration. In the matter kindly clarifiy the following points :-
Regards, VINAY Posts / Replies Showing Replies 1 to 9 of 9 Records Page: 1
Service Receiver would be elgible for availing cenvat credit for the amount paid by him. Further he would liable to pay tax even if the service provider is exempted from the payment of service tax. It is Service Provider who is exempted from the levy of service tax if the turnover does not exceed Rs. 10 lacs. However such exemption is not available to service recipient.
I am fully agreed with CA Rachit Agrawal. CA Rajesh mangal Agrawal
I disagree the views / contention of both the CAs. Under Section 66, "there shall be levied a tax (hereinafter referred to as the Sevice Tax) at the rate of 12 percent of the value of taxable service referred to in subclauses...." . Accordingly, there is no question of leviability of tax in case of Service Provider is exempted, and since there is no levy, tax is not required to be charged in the bill or invoice of Service Provider. Further, in absence of non-levy and not being charged in the bill, the question of payment of service tax under 'reverse charge method' by the "Receipient of Service" does not arise.
Date of submission - 18.07.2012 - By George Araham, Gen. Manager - Prism Cement Ltd.
I am not agreed with the contention of Mr.George Abharam. The New charging section is governed by Section 66B which is as follows. There shall be levied atax (hereinafter referred to as service tax) at the rate of twelve per cent on the value of all the services,other than those services specified in the negative list,provided or agreed to be provided in the taxable teritory by one person to another and collected in such manner as may be prescribed. Kindly further go throgh section 68(2) along with proviso.
Further pl. go through the Notification Number Nofn.33/2012-ST. (related to small service provider). The benefit of this notification is not applicable to those person who are paying service tax as per the provision of sec 68(2) i.e. Payment of tax because of Reverse charge mechanism or payment of tax because of Joint charge mechanism. The relevant portion of the captioned Notification is reproduced here. Notification No. 33/2012 - Service Tax New Delhi, the 20th June, 2012 G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Finance Act), and in supersession of the Government of India in the Ministry of Finance (Department of Revenue) notification No. 6/2005-Service Tax, dated the 1st March, 2005, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide G.S.R. number 140(E), dated the 1st March, 2005, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services of aggregate value not exceeding ten lakh rupees in any financial year from the whole of the service tax leviable thereon under Section 66B of the said Finance Act : Provided that nothing contained in this notification shall apply to,- (i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or (ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under section 68(2) of the said Finance Act read withservice tax rule 1994. CA RAJESH MANGAL AGRAWAL
Dear Sir, Kindly refer para 10.1.3 of "Taxation of Services: An Education Guide" dt. 20.06.2012 issued by CBEC. As per above para, Service Receiver shall have to pay Service Tax which he obliged to pay under the partial Reverse Charge Mechanism even if Service Receiver's or Service Provider's turnover is below thresh hold exemption. Regards. CA Sumeet Tholle
Intersting to see the comments . My views on the same is as follows:- pl. see that the reverse cahrge as per notification is a method of collection of the service tax in certain cases subject to onditions like the SR should be a 'body corporate' and the SP should not be ,rather other than body corporates. The liabilty is on the SP ,in all cases and the Notification No. 30/2012-ST has evoved a method of sharing the same by the SR.Hence,the invoicing done by the SP should be showng the total value of taxable service,after abatement,if any, and then the tax payable ,tax share paid by the SP,balance to be shared by the SR. Then we find any SP ,having taxable value,less abatement,if any,is within 10 lakhs will not be liable to pay tax and thus the share to be paid by the SR will be NIL in such cases.
Although, the learned friends-CAs have rightly quoted by pointing out the provisions and referring to guidance note, however, a doubt is still in my mind that – constitutionally, “a tax shall not be collected without the authority of law”. Which means, ‘there shall be levied a tax……’, and here, the levy is as per Section 66B (now) and I have quoted as Section 66 which has no differences except being modified according to the present regime. Further, the "collection of tax" is governed by machinery provision, and the one which applicable is section 68 [Payment of Service Tax] . The sub-section (2) have been referred by you and some portions relevant on the subject issue is highlighted and reproduced to deliberate , as under :- 68(1) Every person providing taxable service…..in Section 66B…… (2) Notwithstanding anything containedin sub-section (1),…………the service tax shall be paid by such person and in such manner as may be prescribed……. Provided that……may notify the service.. and the extend of service tax…… (payable) Vide notification no 30/2012. dated 20th June, 2012 the same has been notified “in exercise of powers conferred by sub-section (2) of section 68 of Finance Act”. The said notification reads that – “………….., the Central Government hereby notifies the following taxable services and the extend of service tax payable thereon……” A collective reading of above provisions and legally “….the provider of service is taxable… and, the service tax is payable….” (if there is a levy,….) in the manner, as may be priscribed …. , provided that - “the extend of service tax to be paid by such person…..”. This has been reiterated by the learned / respected friend Shri. Unnikrishnan in his quoting. Further, Nofn.33/2012-ST. dated 20th June, 2012, (as referred ) is issued providing / amending threshold exemption excluding those who are falling in the category of (i) and (ii). Here, the proviso (ii) stipulates that – “……the value of taxable services in respect of which service tax shall be paid …..” Now, the question is – having collective notification(s), is it legal and correct to clarifies in the ‘guidance note’ since “there is no value of taxable service” is there to collect the tax…? Even if assume that it is a taxable service, however, the tax is Nil and not levied …! Apart, para - 10.1.3 of the “Guidance Note No. 10 – Miscellaneous” has also been referred by the learned friend/CA. However, when the said para’ is collectively read with para - 10.1.2 , one would observes as contrary….., and the guidance note is for guidance only…..! Pl. enlighten. By : George Abraham
There appears an inconsistency between paras 10.1.2 and 10.1.3. Last word in para 10.1.2 should have been 'receiver' and not 'provider' ,which only make sense ;finally to read-- The service tax payable would include service tax payable by the service receiver. However,in reply to original querry,pl. note that ' any tax paid by SR would be eligible for Cenvat as per para 10.1.4.Hence,it is bound to be revenue neutral at the hands of the SR. Notification no.33/12, makes it clear that the SR will not be eligible for 10 lakhs limit.But the exemption is for ' taxable services of aggregate value not exceeding ten lakhs'. Thus the same value can not be accounted both at the hands of SP and SR .;so when SP is not required to pay tax,the share to be paid by SR should also be NIL. The merit in the reasoning given by learned CA RM Agrawal also can not be overlooked ,which would justify para 10.1.3. A best example of a simple matter is made complicated.;Await further clarification or teat the guide as 'guide' only nd not an authority declaration.
Service receiver have to pay the tax liability under Reverse Charge Mechanism by him even if Service Provider is under thresh hold limit. Yes, Service receipient is eligible to take input tax credit as per the rules as amended time to time. Page: 1 Old Query - New Comments are closed. |
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