Re: [aaykarbhavan] SERVICE TAX WORKS CONTRACT QUERY

Dear member

As per new law of service tax applicable from 1-7-2012,

The reverse charge method is extended to the works contract services to the extent of 50%(partial reverse charge). Thus, 50%service tax is payable by the recipient and the remaining by the provider of works contract service.The condition under reverse charges are

.

1. Service receiver must be a body corporate and

2. Service provider must be

o Individual,

o HUF,

o Partnership firm (registered or unregistered ) ,

o AOP.

3. Both service Provider and service receiver must be located in taxable territory.

If above Conditions are not fulfilled then reverse charge is not applicable.Means if service provider is other then four categories given above then reverse charge is not applicable. Further service receiver must be Body corporate.

The service provider shall issue an invoice complying with Rule 4A of the Service Tax Rules 1994. Thus the invoice shall indicate the name, address and the registration number of the service provider; the name and address of the 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.

Therefore as per above discussion, service receiver and service providers bother are liable to pay service tax (provided certain conditions). So the question is about service tax payment, not valuation of service tax. Hence in your question e.g

 

receipt under works contract Rs. 10000

Deemed value of service under service tax Rs. 4000 (40% of Rs. 10000)

Total service tax payable Rs. 494.4

Service tax payable by Service Provider Rs. 247.20 (50% of 494.4)

Service tax payable by service receiver Rs. 247.20 (50% of 494.4) (Clearly write in the invoice that this is to be paid by service receiver)

 

therefore your answer is 50% of 4.94 %.... not of 12.36% 

--
Regards

CA Nayan Kahar

Partner

Thakkar Khamar & Assocites

Chartered Accountants

525, Vraj Siddhi Tower,

Opp Marimata's Lane

Nr.Khanderao Market,

Palace Road,

Vadodara. 390001 Mobile: 97243 65222

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From: CA. PRAMOD PARMAR <prpca2004@gmail.com>
To: lucknow-ca@yahoogroups.com; ThaneCAs <ThaneCAs@yahoogroups.com>; SERVICE TAX QUERY <aaykarbhavan@yahoogroups.com>; TaxFinSoft <TaxFinSoft@yahoogroups.com>; amresh vashisht <vashisht_2000@yahoo.com>; aurangabad_ca <aurangabad_ca@yahoogroups.com>; IndianCAs@yahoogroups.com
Sent: Wednesday, 19 December 2012 6:22 PM
Subject: [aaykarbhavan] SERVICE TAX WORKS CONTRACT QUERY

 

Dear Members,

A Co. is service receiver

a firm is service provider

Firm will raised bill for works contract and will charge service tax 12.36% on  40% of original works = 4.944%

what about reverse charge.

whether receiver will bear 50% of 4.944% or 50% of 12.36%

Regards,
CA P R Parmar

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