Reverse mechanism

[ashok Bohra]

Dear sir,

in case of reverse mechanism, how to protect from double tax, as per new system, we are liable to pay service tax on several services, but consultant,Advocate, transporter,men power supplier,security service provider, courier, charge service tax on his invoice, and we have to pay, and under reverse mechanism  department too demand, how to protect from double taxation. 

 

 

 

[Mohit Jain]

In my view, If the service provider is charging service tax in his Invoice and you have to pay that on reverse charge mechanism then, in that case you do not need to reimburse the amount to your service provider upto the amount you have to deposit with Service tax department. However, you have to clarify these things to your service provider in detail. That since it is your liabiliy, not his that is the only reason you are paying less to him.

[Brijesh Verma]

Statutory Liability under notification 30/2012 cannot be shifted by mere arrangement between the provider and receiver of services. SO if all conditions mentioned under the notification 30/2012 are satisfied and RCM is found applicable, then you must have a word with your Service Provider and ask them not to to force for payment of service tax amount from you which you are statutorily required to deposit. 

[ashok Bohra]

Dear Sir,

Thanks for your reply and opinion , how do service provider like transporter or consultant,know  to whom charge service tax and on what document  to rely and satisfied department for not charging service tax. For example in case of TDS get certificate from source ,and satisfy IT. Simply verbal confirmation will not save service provider.

[Brijesh Verma]

The service provider whose services are such that they fall under reverse charge and they are in the category on whom reverse charge is applicable under the provisions of the notification 30/2012, are not statutorily bound to maintain any compliance are regards payment etc, nor are they required to keep any proof in order to satisfy the CEO. Its not about verbal or written communication, its about the law and the law simply states that whenever RCM is applicable then the liability (Fully or partially) shift to the service receiver and in such a case the service provider gets absolved from his liability to the extent the liability is statutorily shifted to the receiver.

AI Summary

Reverse charge mechanism shifts service tax payment responsibility to the service receiver, irrespective of supplier invoicing. Reverse charge shifts the statutory obligation to remit service tax to the service receiver when applicable; private arrangements cannot alter that liability. The receiver may adjust payments to suppliers by withholding amounts equivalent to its tax liability, while a supplier whose liability is statutorily shifted is relieved to that extent and is not required by law to maintain special proof to be absolved.