Confusion in notification no. 30/2012 WCT-Reg.

[RAM SHARMA]

Dear Experts,

As per service tax notification under reverse charge in respect of  services  provided or agreed to be provided  in service portion in execution  of works contract. The liability is define 50% for both service provide as well as receiver.

I am little bit confuse in the end of notification in Explanation-II regarding work contract tax given below:-

Explanation-II. - In works contract services, where both service provider and service recipient is the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service.

The above explanation create dispute at the time of service tax audit if a service provide or receiver assess the value in lower side. Please clerify.

Thanks

 

 

[Vijay Chitte]

Legally he can use his own method for vauation, practically it is difficult and hence advisable to follow same method as followed by service provider - unless u have strong view that they are not following correct method.

AI Summary

Valuation choice under reverse charge: recipient may adopt an independent valuation method, risking audit disputes. Explanation-II allows a service recipient in works contract services, where both parties are liable under reverse charge, to choose its own valuation method independently of the service provider's method; this legal independence can produce differing values between parties and thereby provoke disputes during service tax audits, so practical advice is to follow the provider's method unless there is a strong reason to the contrary.