TAX LIABILITY UNDER REVERSE CHARGE MECHANISM AND JOINT CHARGE MECHANISM

Transcription

1 TAX LIABILITY UNDER REVERSE CHARGE MECHANISM AND JOINT CHARGE MECHANISM - BY CA MAYUR ZANWAR

2 INTRODUCTION Service Tax is a Vital Part of Indirect Tax Structure. It can be spelled as tax on specified services provided by the Service Provider. Usually the person providing the Services is liable to pay Service Tax but here comes an exception, where service provider is not liable or is partially liable to pay service tax and the recipient has to bear the liability to pay the tax on behalf of the service provider. This concept is known as :- Reverse Charge Mechanism and Partial Reverse Charge Mechanism

3 Background of Reverse charge Under Service Tax, the concept of Reverse charge was introduced for the first time by Finance Act, 1997 wherein the customer / client of clearing and forwarding agents and the goods transporter operator was termed as person responsible for collecting service tax. However, Hon. Supreme Court in Laghu Udyog Bharati Vs. Union of India (112) E.L.T. 365 (S.C.) struck down the provisions as being ultra vires the Act itself (Finance Act, 1994).

4 W.e.f , Section 68 of Finance Act, 1994 was amended to empower Central Government to notify certain taxable services for which the prescribed person will be the person liable for paying service tax. Specific statutory provision for levy of service tax on import of services was enacted vide Section 66A w.e.f After introduction of Goods Transportation Agency service in Finance (No. 2) Act, 2004, reverse charge of ST was introduced on specified persons w.e.f

5 Reverse charge Judiciary views Shifting of Statutory liability Section 68(2) is a specific provision making the service receiver to pay tax. However in the light of judgments given by courts it is settled that this statutory liability can be shifted by a mutual\concurrence. It was held in Umasons Auto Compo Pvt Ltd Vs CCEx CESTAT Mumbai, 2014(2) TMI 100, that once the amount of service tax is accepted by the revenue from the provider of service of GTA service, it can not be again demanded from the recipient of GTA service. Case decided in favour of assessee. Same ruling held in the case of Navyug Alloys P Ltd Vs CCEx 2008(8) TMI 100 CESTAT Ahemadabad.

6 A famous ruling given by Hon ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd Vs. Dewan Chand Ram Saran SC 2012 (4) TMI 457 where in it was held as follows:- In case recipient of the service is the person liable to pay service tax, such recipient can enter into contract with service provider that burden of any tax under contract would be borne by service provider. The provisions of service tax are relevant between the assessee and the tax authorities; there is nothing in law to prevent the parties from entering into agreement regarding burden of tax arising under contract.

7 Sr. No. Nature of Service Service Provider Service Recipient Rate (Provider) Rate (Recipient) 1. Insurance Agent Services Any Any Nil 12.36% 2. Transportation of Goods by road GTA 6 Category Specified Nil 3.09% 3. Sponsorship Services Any Firm or Company Nil 12.36% 4. Import of Services Any Any Nil 12.36% 5. Advocate Services Individual / Firm / LLP Any Business Entity Nil 12.36% 6. Support Services by Govt. & Local Authority Govt. or Local Authority Any business Entity Nil Renting of Motor Vehicle Individual / HUF / Firm / AOP Company 7.416% (In case of abated) 4.944%

8 Sr. No. Nature of Service Service Provider Service Recipient Rate (Provider) Rate (Recipient) 8. Supply of Manpower Individual / HUF / Firm / AOP 9. Works Contract (New construction) Individual / HUF / Firm / AOP Company 3.09% 9.27% Company 2.472% 2.472% 10. Works Contract (Repair/Maint Goods) Individual / HUF / Firm / AOP Company 4.326% 4.326% 11. Works Contract (For Immovable Property) 12. Works Contract (Tax on Labour portion) Individual / HUF/Firm/ AOP Individual / HUF / Firm / AOP Company 3.708% 3.708% Company 6.18% 6.18% 13. Services by Director Individual Company Nil 12.36%

9 Services under Reverse Charge 1. Insurance Agent Service:- Applicability:- Insurance agent providing services to a person carrying on insurance business. Analysis:- Relief from service tax compliance to the extent of income receivable from person carrying on insurance business. Service tax are required to be discharged by the agent as service provider on the income other than above, earned by such agent. As per Rule 9 Place of Provision of Service Rules, 2012 Insurance Agent - located in Non Taxable Territory service is considered as non Taxable. Insurance Agent - located in Taxable Territory service is considered as Taxable.

10

11 2. SPONSORSHIP BUSINESS Applicability:- Sponsorship services provided to any Body corporate or Partnership firm located in taxable territory. Service Tax Liability:- Service receiver is a body corporate or partnership firm located in taxable territory- If the receiver of service is not body corporate or partnership firm or if such body corporate or partnership firm is not located in taxable territory Entire tax payable by service receiver Entire tax is payable by service provider.

12 Prior to sponsorship was defined in section 65(99a). Crux of the definition is as follows Naming an event after the sponsor; Displaying the sponsor company s logo or trading name; Giving the sponsor exclusive or priority booking rights; Sponsoring prizes or trophies for competition DOES NOT INCLUDE financial or other support in the form of donation or gift where in service provider is under no obligation to provide anything in return to such donation.

13 Scope of Sponsorship All types of sponsorships covered excluding advertisements and certain sports related sponsorships which are exempted as per mega exemption notification. Rate - Full ST to be paid by Service Receiver This was in vogue even before Finance Act 2012

14 Exemption based on Mega exemption Notification Sponsorship of the following sporting events exempted: (a) by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone; (b) by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat; (c) by Central Civil Services Cultural and Sports Board; (d) as part of national games, by Indian Olympic Association; or (e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;

15 3. Legal Services/Services by advocate Applicability:- Services provided to business entities, with a turnover exceeding Rs. 10,00,000 in the preceding financial year, tax is required to be paid on reverse charge by the business entities i.e. service receivers. Exemption:- Legal services provided by advocates or partnership firms of advocates are exempt from service tax when provided to the following: An advocate or partnership firm of advocates providing legal services any person other than a business entity A business entity with a turnover up to rupees ten lakh in the preceding financial year.

16 4. Goods Transport Agency Applicability:- Service provided by a goods transport agency in respect of transportation of goods by road, where the person liable to pay freight is, Any factory registered under or governed by the Factories Act, 1948 Any society or a co-operative society Any dealer of excisable goods, who is registered under the Central Excise Act, 1944 Any body corporate, or Any partnership firm whether registered or not, including association of persons; Provided by that when such person is located In a non-taxable territory, the provider of such service shall be liable to pay Service Tax.

17 GTA is Located in Taxable Territory GTA is Located in Non- Taxable Territory Specified person located in taxable territory it is taxable service reverse charge Specified person located in taxable territory it is taxable service reverse charge Non Specified person located in taxable territory it is taxable service Direct Charge Non Specified person located in taxable territory it is non taxable service Person liable to pay freight located in non taxable territory it is taxable service Direct Charge Person liable to pay freight located in non taxable territory it is non taxable service

18 Analysis Taxability 75% Abatement on the Service Amount say On Rs 100 Taxable Amount Rs.25 Liability Recipient Liable to discharge ST Any person who pays freight either himself/agent Place of Provision POP of services of GTA shall be the Location of Person liable to pay tax. Provided that when the person is located in Non Taxable Territory, the provider shall be liable to pay ST

19 Exemption from Service Tax for GTA Transportation of fruits, vegetables, eggs or milk by road in a goods carriage No Service Tax is to be paid when Gross Amount charged on all consignments transported in a goods carriage does not exceed Rs. 1500/- No Service Tax is to be paid when Gross Amount charged on individual consignment transported in a goods carriage does not exceed Rs. 750/- Taxable value of Goods Transport Agency Service shall be exempt in excess of 25%. In other words, abatement of 75% is available. Services tax paid on service provided for transport of goods from inland container depot to the port of export can be claimed as refund.

20 5. Support Services by GOI Support Service provided by GOI or Local Authority except:- Renting of Immovable Property Services specified under Section 66D Entry (a) of the Finance Act, 1994, which are:- Services provided by Department of Post Office like Speed Post Services in relation to Vessel or Aircraft GTA or Passenger Transport Service To any business entity located in the taxable territory, the recipient of such service.

21 Analysis Support Services provided by GOI or Local Authority Type of Service Renting of Immovable Property Taxability of Service Direct Charge Services Specified in rule 66D Direct Charge Any other support service provided to business entity located in Taxable Territory Any other support service provided to other than business entity. Reverse Charge is applicable Service tax is not applicable as per Negative List

22 6. Director Services Applicability:- In relation to services provided by or agreed to be provided by a director of a company to its company, the recipient of such service. All payment against services including part time Director s remuneration, director s setting fees, commission etc., receivable from company to the director have been subjected to service tax. Service tax is not applicable where employer employee relationship is existing therefore any sum paid to whole time director is not liable to tax.

23 Analysis Taxable Territory Director (Service Provider) Service is non taxable as service recipient is out side taxable territory Non Taxable Territory Company (Service Receiver) Service is taxable & liability is on the recipient under reverse charge Service is taxable & liability is on the recipient under reverse charge Company (Service Receiver) Service taxable as service recipient is inside the taxable territory and reverse charge is applicable Director (Service Provider)

24 7. Import of Service Applicability:- In relation to any taxable service provider or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory, the recipient of such service. For the purpose of this service, Taxable Territory means the territory to which the provisions of this chapter apply i.e. India excluding the State of Jammu & Kashmir. Even if the Service Provider is located outside taxable territory, the Service Tax is payable by recipient of Service.

25 Analysis Taxable Service which is provided to Recipient which is located in Taxable Territory then liability is on recipient under reverse charge

26 Practical Issues involved Location of service receiver i.e. Indian subsidiary India Is it a supply of manpower service by the foreign holding company? Case law relied Volkswagon India P ltd Vs CCEx 2013(11) TMI 298 CESTAT Mumbai 30/09/13 Held Not a supply of manpower it is employer employee relationship existed Appellants normally engage its global employees by way of Inter company Employment agreement Employees are relieved from foreign company and given appointment orders They work solely under the control, supervision and direction of the Indian company.

27 Services under Partial Reverse Charge 1. Manpower Supply Service:- Applicability:- In relation to services provided by way of supply of manpower for any purpose or security services by any Individual, HUF, Partnership Firm, AOP located in Taxable territory to a business entity registered as body corporate located in taxable territory, both the service receiver and the service provider to the extent notified in the Act. Supply of manpower means supply of manpower, temporarily or otherwise, to another person to work under his control.

28 Taxable Territory Specified person (Service Provider) Service is non taxable as service recipient is out side taxable territory Non Taxable Territory Any Person (Service Receiver) Service is taxable & liability is on the recipient under reverse charge Service is non taxable Business is Body Corporate (Service Receiver) Service taxable as service recipient is inside the taxable territory and reverse charge is applicable Any Person (Service Provider)

29 Judicial Views : K. Damodarareddy Vs CCEx 2009(9) TMI 386 CESTAT Bangalore Manpower recruitment or supply agency- The assessee entered into a contract with a cement company for providing the work which included loading of cement bags into closed wagons, wagon door cleaning, sealing and riveting etc. Hon ble Tribunal held that the assessee had not rendered taxable services classifiable under the category of Manpower recruitment or supply agency but had only performed the work using their own contract labour, hence it is only contract for work and not manpower.

30 2. Rent a Cab Applicability:- In relation to services provided by way of renting of a motor vehicle designed to carry Passenger By any person who is not engaged in a similar business by any individual, HUF or Partnership Firm including AOP located in a taxable territory To a business entity registered as body corporate, located in taxable territory, both the service provider and service recipient to the extent notified in the Act.

31 Percentage to Deposit Rent a Cab Service If abatement of 60% is availed Service Receiver is liable to 100% on abated value i.e. 40% Service provider is not liable If abatement of 60% is not availed Service Receiver is liable to 40% Service Provider is liable to 60%

32 Taxability Rent a Cab For more than 1 For less than 1 Month month If both SR and SP located in Taxable Territory Either of SR or SP located in Non Taxable territory Location of service provider Location of Service Recipient Location of Service Recipient

33 3. Works Contract Service Service Provided by individual, HUF, Firm or AOP Service Received by business entity registered as Body Corporate Partial Reverse Charge is applicable and both the service provider and service receiver is liable to pay Tax.

34 Percentage to Deposit In case of works Contract Service- Service Recipient is liable to pay 50% Service Provider is liable to pay 50%

35 Taxability Works Contract Service Where SP and SR is situated in Taxable territory Where any one is situated in non taxable territory As per rule 8 It is Taxable Service Service performed on goods made physically available Location where service is actually performed Where service is provided from a remote location Location where goods are located at the time of provision of service

36 Details in Invoice under RCM Invoice shall indicate the name, address and the registration number of the service provider and person receiving taxable service; the description and value of taxable service provided or agreed to be provided; and the service tax payable thereon. As per clause (iv) of sub-rule (1) of the said rule 4A "the service tax payable thereon' has to be indicated. The service tax payable would include service tax payable by the service provider.

37 Format Of Invoice M/s MPS Labour Contractor To: M/s X Pvt. Ltd. Date: Invoice No. Rs. Rs. Assessable Value (Being the charges for manpower supplied for the month of.) 10,00,000 Add: Service Tax Rate (at) 12.00% 2.00% 1.00% Less:ST liability to be borne by SR in terms of Notification No., 1,20,000 2,400 1,200 1,23,600 90,000 1, ,700 Net ST Payable by SP 30, ,900 30,900 Total 10,30,900

38 Issues under RCM Whether the Credit of Service Tax paid under RCM is eligible for CENVAT Credit?? ÞNormally, the credit of the entire tax paid on the service received by the service recipient subject to the provisions of the CENVAT Credit Rules The credit of tax paid by the service provider would be available on the basis of the invoice subject to the condition specified in the Rules. The credit of the tax paid by recipient under Partial RCM would be available on the basis of tax payment challan. Point of taxation for service recipient. ÞIn terms of the Rule 7, point of taxation for the service recipient will be the date when he pays for the service. ÞExample:- ÞDate of Invoice July 2012 ÞDate of Payment August 2012 Hence the point of taxation for Service Provider will be August 2012.

39 Is the reverse charge applicable on service provided or complete before 1st July, 2012 though payments were made after 1st July, 2012?? ÞFor any service whose point of taxation has been determined and whole liability affixed before the new provisions will not apply. Merely because payments are being made after will not add any additional liability on the service receiver in respect of such services. How to compute quantum of tax liability? ÞTo be carried out in four steps: First step The first step will be to compute tax liability by the SP in respect of each service rendered. It means that the SP will have to determine ST liability with respect to each invoice issued. Second step In the second step, invoice to be raised will contain total tax liability in respect of the particular invoice and apportionment of the same as provided. Third step In the third step, since the SP will be providing the same type of services to all the SRs, balance amount of ST as appearing in various invoices will be his total tax liability. Fourth step In the fourth step, amount of the CENVAT credit for which he is entitled to will be deducted from the total tax liability as determined under third step.

40 Computation of tax liability of Service Receiver ÞSR liable to pay ST on receipt of invoice from SP On receipt of the invoice from SP, the SR will check its correctness and, if found in order, will have to discharge the same by making its payment before 5th of the next month. It should be noted that no deduction can be made by SR on account of CENVAT credit. SR will have to make payment of the entire amount of liability. On making of its payment, SR will be entitled to claim CENVAT credit in respect of the ST paid by him subject to the provisions of the CENVAT Credit Rules. ÞWhen can SR claim credit of amount shown by SP in invoice A question that may arise here is whether SR can claim credit for the amount of tax liability as appearing in the invoice of SP in the month in which invoice is received or in the month in which ST is paid? Answer is:- No SR can not claim credit of amount shown by SP in invoice

41 CENVAT credit of SP and SR ÞCenvat credit of SP A question may arise how to claim CENVAT credit of SP. In the above case (i.e. in Format of Invoice), ST liability of SP will be Rs. 30,900. For example, CENVAT credit entitlement of MPS is Rs. 25,000. In that case, ST liability of MPS will be Rs. 5,900 (i.e., 30,900 â 25,000). If CENVAT credit entitlement of MPS is, say, Rs. 35,000, net amount of ST liability of MPS will be Rs. NIL. An amount of Rs. 4,100 will be carried forward. ÞAn example - As far as X Pvt. Ltd. is concerned, it can claim CENVAT credit of Rs. 30,900 in the month in which invoice is received. A question may arise with respect to Rs. 92,700, i.e., ST liability component falling on X Pvt. Ltd. Can it be claimed in the month in which the invoice has been received or after making payment of the same, i.e., next month. ÞIt can be Claimed after Payment of the same.

42 SP s failure to discharge its ST liability ÞWhat will happen if in the above case MPS fails to discharge its liability of Rs. 30,900? Whether the ST Department can ask X Pvt. Ltd. to pay Rs. 30,900? No, as per the Notification, ST liability of X Pvt. Ltd. has been fixed at Rs. 92,700. Therefore, it cannot be asked to pay Rs. 30,900 pertaining to MPS. ST Department will have to recover Rs. 30,900 from MPS only. It cannot be recovered from X Pvt. Ltd. SR s failure to discharge its ST liability ÞWhat will happen if in the above case X Pvt. Ltd. fails to discharge its liability of Rs. 92,700? Whether the ST Department can ask MPS to pay Rs. 92,700? No, as per the Notification ST liability of MPS has been fixed at Rs. 30,900. Therefore, it cannot be asked to pay Rs. 92,700 pertaining to X Pvt. Ltd. ST Department will have to recover Rs. 92,700 from X Pvt. Ltd only. It cannot be recovered from MPS.

43 When SP would not be liable for ST ÞIt may so happen that SP may be availing of basic exemption limit of Rs. 10,00,000. In that case he will not be liable to pay ST. A question that may arise whether, in that case, SR will be liable to pay ST? For example, in the above case assuming that MPS is entitled to basic exemption limit of Rs. 10 lakhs. Therefore, naturally it will not be charged ST. In that case, X Pvt. Ltd. will not have to pay any ST, even though it is a Pvt. Ltd. Co. When SR would not be liable for ST ÞThis is going to be the most difficult situation for various business entities. It may so happen that SR may not be covered under ST provisions, as they may not be providing any services. For example, an entity carrying on trading activities only. Let us take another case, that of an entity providing services total value of which is Rs 10 lakhs and, therefore, entitled to basic exemption. (a) Whether SR will have to obtain registration under ST? Yes, SR will have to obtain Registration under ST (b) Whether SR will have to file periodical ST return? Yes, SR will have to file periodical ST return

44 Issue of Invoice by SP ÞThis is going to be the most complex exercise. For which amount invoice is to be issued by SP? Should the amount received be considered as excluding tax liability of the SP and SR? In that case, both the SP and SR will have to pay following amount as ST : Value of Service 100,000 SR, i.e.,y Pvt. Ltd % 9,270 SP, i.e., M/s PPF 25.00% 3, ,090 Less: Advance Received 100,000 Balance to be received from Y Pvt. Ltd. 3,090 Example 1 In this scenario, in addition to advance paid of Rs. 1,00,000, Y Pvt. Ltd. will have to make payment of Rs. 3,090 to M/s PPF and Rs. 9,270 to the Government to discharge its liability. Thus, it will be paying in all Rs. 1,12,360.

45 13.2 Example 2 What will happen if Y Pvt. Ltd. insists on that it is not ready to bear any burden other than Rs. 1,00,000 already paid? In that case, the computation will be as follows : Value of Service 89,000 SR, i.e.,y Pvt. Ltd % 8,250 SP, i.e., M/s PPF 25.00% 2,750 91,750 Less: Advance Received 100,000 Balance to be paid to Y Pvt. Ltd. (8,250) Example 3 As can be seen from above, advance paid of Rs. 1,00,000 will result into tax liability of Rs. 8,250 for Y Pvt. Ltd. At the same time, it will have to recover Rs. 8,250 from M/s PPF. For obvious reasons, this may not be acceptable to Y Pvt. Ltd.

46 Two main issues There are two main issues, viz., loss of revenue and inconvenience to small business sectors. Let us examine each of these issues ÞLoss of Revenue It is a fact that a large number of assessee who collect the tax and do not pay it to the Government. Many of them do not even file ST-3 return. Is this the remedy for solving the problem? What is the guarantee that the SR will pay the tax? Secondly, this provision covers limited number of companies as SRs. What about other cases of SRs wherein such things will continue to happen? Will they be permitted to occur? ÞInconvenience to small business sectors They have limited resources We have seen the problems involved and additional compliances required to be made by SRs. To what extent it is correct to presume that all the limited companies are large ones? There are hundreds of small businesses having corporate structure but which are small ones and having limited resources. Will this not add to their burden? How to check tax evaders As all of us know, till the ST Department carries out in-house changes in its administration large scale evasion of tax will continue to take place. What is required is sincere efforts to catch the tax evaders. Have any serious attempts been made in that direction so far? ST Department is having data of all the registrants with it. It is a known fact that majority of them do not file ST-3 return. In how many cases notices have been issued for non-filing of return? In how many cases coercive actions have been taken to recover tax from defaulters and tax evaders?

47 Important points relating to RCM CENVAT can not be availed for discharging the ST Liabilities on RCM ST Paid under RCM can be utilize towards the discharge ST on output services Threshold exemption of upto Rs.10 Lac is not applicable here in RCM except Legal services Allowed Refund of unutilized CENVAT credit availed from input services as per Rule 5B of Central Excise Rules,2004

48 Do SSI Exemption is available to Service Receiver? Can the Service Receiver use CENVAT to pay tax under reverse charge? Under Partial RCM, what amount do service provider is required to show on the invoice? If service provider has agreed to pay entire payment of service tax liability. He is willing to give an undertaking in that regard. In that case, do service receiver is liable to pay service tax? What will happen if SR makes adjustment and deducts certain portion of the invoice value.

49 Issues Related to Exemptions Is Service Recipient liable to pay his share of service tax under Reverse Charge Mechanism (RCM) when basic exemption limit of Rs. 10 Lakhs is available to Service Provider under Notification No. 33/2012-ST? Exclusions (Negative List), Exemptions and Abatements are provided in the service tax law. Are such benefits also available to the service recipient liable to pay service tax under RCM?

50 Issues Related to Exemptions M/s. ABC Corporation is a business entity with turnover exceeding Rs. 10 lakhs in preceding financial year and receives services of value of Rs. 3 lakhs from an Advocate in current financial year. ABC Corporation is liable to pay service tax on this value of Rs. 3 lakhs under RCM. ABC Corporation gets commission of Rs. 9 lakhs from XYZ Ltd. in current financial year and has no other service income in the current financial year. Can ABC Corporation claim exemption under notification No. 33/2012-ST for commission income of Rs. 9 lakhs if its aggregate value of taxable service provided in the preceding year does not exceed Rs. 10 lakhs? Is ABC Corporation eligible to claim exemption upto Rs. 10 lakhs in next financial year under Notification No. 33/2012-ST?

51 Issues Related to Exemptions Bombay Roadlines is a Goods Transport Agency providing services in respect of transportation of goods by road. It provides services of the value of Rs. 100 lakhs on which service recipient is liable to pay service tax as the person liable to pay freight is one of the specified persons as stated in Notification No. 30/2012- ST. In addition to this, Amravati Roadlines provides services of Rs. 10 lakhs for transportation of goods by road for which it is liable to pay service tax as provider of service since the person liable to pay freight is not falling within any of the seven specified categories in Notification No. 30/2012-ST. Assuming that the aggregate value of taxable services of Amravati Roadlines does not exceed Rs. 10 lakhs in the preceding financial year, can it claim exemption upto Rs. 10 lakhs in current financial year under Notification No. 33/2012-ST?

52 Issues Related to Exemptions Service Provider has not availed exemption or abatement which is legally available and prepared the invoice without considering exemption or abatement. Can service recipient claim such exemption or abatement for payment of service tax under RCM?

53 Issues Related to valuation Under reverse charge mechanism, if service tax is not charged separately, can value of service be considered as if it is inclusive of service tax? Is service provider required to state service tax payable by service recipient under RCM in his invoice?

54 Issues Related to Compliance A service recipient is liable to pay service tax under Reverse Charge Mechanism. However, he does not want to get service tax registration and tells his supplier of service to charge service tax and pay it to the service tax department. Can he do so? Is Service Recipient required to obtain registration when there is liability to pay service tax under RCM? If a service provider is registered with service tax department and is now liable to pay service tax under RCM, is he required to amend his existing registration?

55 At what point of time SR will have to pay the ST? Will it be on receipt of invoice from SP? Will it be the month in which advance is being paid to SP? Should SR deduct the amount of tax as attributable to him and pay the balance amount? Is it necessary for SP to make separate computation for tax liability and issue invoice accordingly? Can SP split up the amount of advance received towards value of service and tax? If so, how?

56 Other Issues Akola Municipal Corporation is receiving security/manpower supply/works contract services from Individuals/Partnership Firms. Whether a Co-operative Housing Society is liable to pay service tax under Reverse Charge Mechanism? XYZ Ltd., a non-profit organization is registered as a Company under section 8 of the Companies Act, Is such a company required to pay service tax under reverse charge mechanism as recipient of legal service from an advocate? Whether a Company is liable to pay service tax under RCM on reimbursement of motor vehicle hiring charges to its employees if such service is provided by an individual/ HUF/ Partnership Firm/ AOP located in taxable territory?

57 From the Invoice of service provider it is not clear whether he has claimed any abatement for Renting of Motor Vehicle Service? Is it going to affect service tax liability as recipient? Is a company liable to pay service tax under RCM on the salary paid to a director? A Director of the company has given a premise on rent to the company. Is the company liable to pay service tax under RCM on such rent paid to the director? Whether OPC will be treated as Proprietorship concern or Body Corporate?

58 Mr. Raj is fighting his Civil suit against Relative and paying fees to an Advocate Firm. Is Mr. Raj liable to pay service tax under RCM on fees paid to advocates? A company has availed accounting services from an Advocate. Is company liable to pay service tax under RCM on such services? Mr. XYZ is running a Textile business and his turnover in the preceding financial year was more than Rs. 10 lakhs. He has availed services of an advocate for his business and paid Rs as advocate fees. Is he liable to pay service tax under RCM?

59 Accounting under RCM Case 1 Where Service Tax has been charged fully in Invoice Debit Credit Expense A/c Dr Service Tax Input Credit A/c Dr Service Tax Deferred Input A/c Dr To Vendor A/c To TDS Payable A/c To Service Tax Payable A/c - Reverse Charge Case 2 Where Service Tax has not been charged in Invoice Expense A/c Dr Service Tax Deferred Input A/c Dr To Vendor A/c To TDS Payable A/c To Service Tax Payable A/c - Reverse Charge

60 Case 3 In case of Abatement ( e.g. 40%) Debit Credit Expense A/c Dr Service Tax Input Credit A/c Dr To Vendor A/c To TDS Payable A/c To Service Tax Payable A/c - Reverse Charge

61