tax applicable-reg

[Ramakrishnan Seshadri]

Dear Sir,

During the service tax audit the auditors has demanded service tax for services provided  for amc for repair,modification work etc .The service providers are individual/firm.The audit team has calculated 70 percent of the value and claimed 12.36 percent with interest.

Could any one confirm that how we have pay service tax. whether reverse charge mechanism is applicable. If applicable means then  we have to calculate  35 percent of the value.

The service provider has  not registered with the department. whether we have to pay the service provider tax also .

Please clarify. very urgent.

Thanks

S.Ramakrishnan

[Rajagopalan Ranganathan]

Sir,

Annual maintenance contract is included in works Contract Service.  50 percent of the Service tax on the same is payable by the service provider and 50 percent of the tax is payable by the service receiver (vide Sl. No. 9 of Notification No. 30/2012-Service Tax dated 20.6.2012 as amended).  Value to be adopted for payment of service tax is 70 percent of the charges levied by the Service provider subject to the condition that CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of CENVAT Credit Rules, 2004.

You have to calculate the service tax by taking 70 percent of the service charge charged by the service provider in his invoice and calculate the service tax payable at the rate of 12.36 percent .  You have to pay only 50 percent of the tax amount so calculated under reverse charge mechanism.

[Ramakrishnan Seshadri]

Dear Sir,

Whether cenvat credit 50 percent paid  is eligible for the service tax paid by the service receiver

Regards,

S.Ramakrishnan

[Rajagopalan Ranganathan]

Sir,

 You are eligible to take credit of 50 percent tax paid by you under reverse charge mechanism and utilise the same for payment of CENVAT duty on your final products or service tax payable on output service provided by you.
 

AI Summary

Reverse charge mechanism: service receiver must pay half the service tax on works contract AMCs and may claim CENVAT credit.
Annual maintenance contracts for repair and modification are treated as Works Contract Service with taxable value at 70% of invoiced charges when no input CENVAT credit has been claimed. Under the reverse charge mechanism the service tax is apportioned equally: the provider pays fifty percent and the service receiver pays fifty percent of the tax computed on 70% of the charges. The service receiver who pays tax under reverse charge may claim CENVAT credit for the tax it has paid and use it against output duties or service tax, subject to the CENVAT Credit Rules.