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Service under Reverse charge mechanism

Service Tax - Started By: - Ganeshan Kalyani - Dated:- 9-2-2016 Last Replied Date:- 16-2-2016 - Dear Experts,I would like to discuss on Service Tax applicability under below given scenario:Suppose, a service provider (say A ) who as pure agent has arranged legal consultancy service from Advocate (say B ) for actual receiver of service (say C ). Here, B has raised invoice on A who in turn has raised an invoice on C with actual cost basis and no profit element. The description on invoice appears a .....

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Reply By Rajagopalan Ranganathan - The Reply = Dear Sri. Kalyani Sir,I totally agree with your view on the ground the invoice raised by A on C is on the basis of invoice raised by B on A. If the amount demanded by B is the same as the amount demanded by A from C, then we can conclude A is acting as a pur agent of C. In that case it is foe C to pay the service tax on reverse charge mechanism. If A charges any addition amount along with the amount charged by B then B has to pay the service tax on .....

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invoice raised by B on A. If the amount demanded by A from C is the same as the amount demanded by B from A, then we can conclude A is acting as a pure agent of C. In that case it is for C to pay the service tax on reverse charge mechanism. If A charges any additional amount along with the amount charged by B then A has to pay the service tax on RCM basis and collect it from C through his invoice. This is my view. - Reply By KASTURI SETHI - The Reply = Dear Sirs, For discussion sake A is provid .....

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tion. Why any person would provide intermediary service without any consideration ? Is it charitable ? [(f) intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the main service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account;] C & F Agent (say A) provides service as pure agent to the custo .....

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iable under Intermediary Should we examine this aspect also ? - Reply By Ganeshan Kalyani - The Reply = Thank you so much Sri. Rajagopalan Sir and Sri. Kasturi Sir for valuable reply. Thanks. I have raised this query because I had a thought that if A is primarily availing the service only for the purposes of providing it to C and B is not directly rendering the service to C In this case B and C are the party to the transaction and in no way B is directly providing the service to C . Therefore I .....

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overed under one roof (WCS). These are Commercial or Industrial Construction, Residential Complex, Builders' services, Management, Maintenance or Repair Services, Erection, Installation and Commissioning services etc. In your cross query, so many hidden issues are involved. These are RCM, Classification, methodology of valuation, abatements. For the purpose of valuation, all these services can be separately classified under their erstwhile Chapter/Accounting Codes. You know old accounting co .....

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terial and abatement claim. I mean to say ST can be paid on pure labour on the services mentioned under one roof but subject to the documentary proof of ascertainment of pure labour. If ST is to be paid on pure labour, there is no question of abatement and no question of service with material. Otherwise also it is very cheaper to pay ST on pure labour. Here is an example Suppose a manufacturer purchases compressor for installation in split A.C. in the factory. Price of compressor is ₹ 1000 .....

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s.525 +525). 50% each. On pure labour ST is far less. In case any assessee can bifurcate value of material and pure labour charges and pay ST on pure labour charges, the department cannot object. It is an option for the assessee to either to avail abatement or not. If any assessee is unable to segregate material and pure labour e.g. construction service, he will have option to avail abatement and forgo cenvat credit. You know pure labour cannot be classified under works contract service. If any .....

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arity from your reply. However just a little bit of discussion more. If suppose a supplier supplies machines and he does the installation and commission also. But while billing he does charge only for the sale of machinery and the installation charges are included in the price of machinery itself. The machinery cost is offered for VAT but service tax ??? Service is there no about but including in tn cost. - Reply By Ganeshan Kalyani - The Reply = In my above post will the department ask the asse .....

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ng dutiable and exempted goods. Exempted goods were much more than dutiable goods. The party was not in a position to maintain separate records of common inputs and as per erstwhile Rule 57CC , they were required to pay an amount of 8 % or 10 % of the value of clearances of exempted goods e.g. Credit of ₹ 1000/- on inputs was availed and SCN was issued for Rs.one lakhs. (I do not remember the exact ratio but I remember the issue.) The demand was confirmed by A.C. and upheld by the Commissi .....

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sioner (Appeals) whereas legally it was correct. I mean to say sometimes it is not practically feasible to go by the law. Such like situation indicates flaw in the law. Now we talk on the the present issue, if the value of machinery includes installation charges also as per law, it would be covered under Works Contract Service and would be eligible for the benefit of RCM and abatement.But practically seller and purchaser of machine both knows very well about the price of machine and installation .....

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n. In the subject cited you, the party would pay more ST, if they do not bifurcate knowingly. A few case laws are appended below. In these cases, erection commissioning and installation charges were included in the value of machine and CE duty was paid on the whole amount and demand of ST and imposition of penalty was set aside. The department can not recover Excise duty and ST both. Since Central Excise duty was paid on erection, commissioning & installation charges, because they could not .....

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any assessee has availed the benefit of RCM and abatement with in intent to evade ST, he is liable to penal action. So much depends upon the construction of agreement between Service Provider and Service Recipient. Invoice should also be backed by terms and conditions of the agreement. - Reply By Ganeshan Kalyani - The Reply = Just for discussion purpose. In the last Budget penalty provision was amended to provide for willful evasion of tax and unwilfull evasion of tax. A matter of debate is dep .....

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