Service tax under reverse charge on Vehicle Repair

[Vinay Sharma]

Dear Sir,

When Vehicles are sent for repair and servicing it is a works contract. The service provider charges service tax on service portion and VAT on material portion in the same bill.

Now as a recipient of service, are we liable to pay service tax under reverse charge as it is a works contract. If yes, then will it not be excess service tax as the provider of service has already charged service tax @ 12.36% on the value of service portion in the bill. Please Clarify.

With best regards

[YAGAY and SUN]

Dear Bhuwan,

On the same matter, we had read a favorable judgment duly pronounced by the Tribunal, either in 2013 or in beginning of year 2014. But due virus attack on LAPTOP, data corrupted and therefore, we could not find out the relevant judgment.

According to that judgment, if full service tax is charged and collected by the service provider on Works Contract service under PRSM, then recipient is not required to pay its' own share.

Please also seek clarification from the Commissioner of Service Tax. In case we come across with the relevant judgment, we will share it with you.

Regards

YAGAY and SUN

(Management and Indirect Tax Consultants)

[YAGAY and SUN]

Dear Bhuwan

Tribunal's Decisions

If service tax accepted from service provider, no service tax can be demanded from the service recipient under the reverse charge mechanism

The taxpayer had availed services of a GTA. The GTA service provider paid service tax on such transportation services rendered to the tax payer. The Revenue Authorities, however, demanded service tax from the taxpayer, being the service recipient, under reverse charge mechanism. The taxpayer contended that as per the decision of the CESTAT Ahmedabad in the case of Navyug Alloys Private Limited v Commissioner of Central Excise [2008 (17) STT 362] = 2008 (8) TMI 100 - CESTAT AHEMDABAD, if the service tax has been paid by the service provider, the same cannot be demanded by the service recipient. The Revenue Authorities were of the opinion that if the service tax was paid by the service provider mistakenly, it should claim a refund of the same.

The matter came up for consideration before the Mumbai bench of CESTAT which held that once the service tax has been paid by the service provider and the same has been accepted by the Revenue department, it could not be again demanded from the service recipient. Accordingly, the appeal of the taxpayer was allowed.

Umasons Auto Compo Private Limited v Commissioner of Central Excise [2014 (43) GST 672].

Though this judgment is in favour of service recipient, and If you have not made the payment against this bill as yet, then, you may deduct the service tax payment from the Service Provider's bill and you can pay your share on inform the service provider the legal position in this matter.

This is for your kind information.

YAGAY and SUN

(Management and Indirect Tax Consultants)

AI Summary

Reverse charge liability: recipient not liable where service provider charged and revenue accepted service tax on works contract.
Where the service provider has charged, collected and the revenue has accepted service tax on a works contract for vehicle repair, the recipient is not required to pay the same tax under the reverse charge mechanism. The practice recommendation is that recipients who have not paid may deduct the service tax from the provider's bill and notify the provider of this legal position or obtain clarification from the tax commissioner, relying on tribunal authority that precludes re-demanding tax already accepted from the provider.