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Impact of Change of Service tax liability structure from partial reverse charge to full reverse charge on manpower Supply and Security Services in transition period

Service Tax - By: - Bimal jain - Dated:- 28-3-2015 Last Replied Date:- 3-4-2015 - As Notification No. 30/2012-ST dated 20-06-2012 has been amended vide Notification No. 7/2015-ST dated 01-03-2015, there by shifting the Supply of Manpower and Security services from Partial Reverse Charge to Full Reverse Charge. The stated change will be effective from 01-04-2015. At present, Service tax liability in respect of Manpower supply and Security services are distributed as follows: S. No. Description of .....

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e paid by service recipient from 75% to 100%. Transactions for Manpower supply and Security services entered on or after 01-04-2015 would not pose any problem and manifestly the service receiver would be liable to discharge 100% Service tax under Reverse Charge. But on scrutinizing the stated change in the light of provisions of the Point of Taxation Rules, 2011 ( the POT Rules ), there are chances of turmoil being faced by the service receiver in respect of transactions made in the transitional .....

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n receipt of payment in respect of taxable services provided. But with the introduction of the POT Rules, now Service tax payment is made on accrual basis in terms of the provisions contained under the POT Rules. The general Rule 3 of the POT Rules stipulates that Point of taxation shall be the earlier one among raising of invoice or date of making the payment. Further, if the invoice is not raised within 30 days (45 days) from the date of completion of provision of service, Point of taxation sh .....

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leted on or before to 31-03-2015 but the payment for the same is made on or after 01-04-2015, disputes can arise as to who is required to discharge 25% Service tax liability: Invoice is issued on or before 31-03-2015 but payment is made on or after 01-04-2015 In such case, service provider is liable to pay 25% in terms of Rule 3 of the POT Rules. However, since payment is made on or after 01-04-2015, the Department may invoke Rule 7 of the POT Rules and allege that the service receiver is liable .....

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he POT Rules. However, since payment is made on or after 01-04-2015, the Department may invoke Rule 7 of the POT Rules and allege that the service receiver is liable to pay 100% in view of the amended provisions as the date of payment is Point of taxation. Invoice is issued on or after 01-04-2015 but payment is made on or before 31-03-2015 Since, payment is made on or before 31-03-2015, liability of service receiver would be to deposit Service tax at 75% in terms of Rule 7 of the POT Rules. Howe .....

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