deposit of service tax under reverse charge

[S.C. WADHWA]

An individual furnishes a bill showing service tax 12.36% towards AMC of

EPABX. On such service we as a company is required to pay service tax

on reverse charge mechanicm.

Now what we should do,

Whether to obtain written decalartion from him that he has deposited the

service tax or

We should deposit our share of service tax and give him debit note.

[Rajagopalan Ranganathan]

Sir,

In Ms. Katrina R. Turcotte v. CST, Mumbai-I [2013 (31) S.T.R. 670 (Tri. - Ahmd.)] = 2012 (12) TMI 579 - CESTAT MUMBAI It is held that definition of assessee includes his/her agent. Hence if agent has paid service tax, service tax cannot be demanded from the assessee. If the service provider paid the entire service tax, then the department is precluded from demanding the same from service receiver under reverse charge mechanism since service provider assumes the role of agent of service receiver in such case. However, it is advisable to avoid such short cut methods because you can get relief only Tribunal/Court level and departmental authorities will not have the courage to follow the ratio of decisions delivered by Tribunals/courts.

[Ravi Kumar Somani]

Dear Mr. Wadhwa,

As for now it is suggested to obtain appropriate declaration and also have a contract in place in this regard. Have appropriate documentation to prove that payment is made by service provider to the service tax department. However, going forward if the invoice is raised by the service provider including service tax then pay only towards the service portion and dont pay service tax element and discharge the same under reverse charge directly to the tax authorities.

[YAGAY andSUN]

Dear S.C.Wadhwa,

There are two aspects to this matter.

1. If you had inadvertently paid full amount of service tax in the past to the service provider (where you were also liable to pay you share under Partial Reverse charge mechanism), then, no need to worry as it is settled legal position that if tax is paid by the service provider then no service tax would be demanded from the service recipient, even if he is liable to pay his share under PRCM.
2. For future, you may be cautious and straight away pay you share and make payment accordingly after deducting the amount of your share which you have paid, from the bill/invoice raised by the service provider.

Regards

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[YAGAY andSUN]

Dear S.C. Wadhwa, We are sharing with you an important judgment of the Hon’ble Mumbai CESTAT, in the case of Umasons Auto Compo Pvt. Ltd. Vs. Commissioner of Central Exciseand Customs, Aurangabad [2014 (2) TMI 100 - CESTAT MUMBAI] on following issue:Issue:Whether Service Tax can be demanded again from the Service Recipient under reverse charge, where the same has been paid by the Service Provider and accepted by the Department?Factsand Background:M/s Umasons Auto Compo Pvt. Ltd. (“the Appellant” or “the assessee”) was receiving Goods Transport Agency (“GTA”) service from GTA service provider for which they were paying Service Tax to the provider of GTA service. The provider of GTA service deposited the amount of Service Tax to the Department, which was duly accepted by them. Subsequently, the Appellant has availed Cenvat credit of the amount of Service Tax so paid to the provider of GTA service.The Assessing Officer raised demand for Service Tax on GTA services availed by the Appellant on the ground that in respect of GTA services, service recipient (i.e. the Appellant) is liable to pay Service Tax in terms of Section 68(2) of the Finance Act, 1994 (“the Finance Act”), and if the same has been paid by the service provider, recipient can seek refund of the same. The assessee preferred an appeal before the Commissioner of Customsand Central Excise (Appeals), Aurangabad who has upheld the Adjudication order and confirmed the demand. Hence the Appellant preferred an appeal before the Hon’ble Mumbai CESTAT.Held:It is held by the Hon’ble CESTAT that once the amount of Service Tax is accepted by the Revenue from the provider of GTA service, it cannot be demanded again from the recipient of the GTA service.Therefore, the Hon’ble CESTAT rejected the contention of the Department and decided the case in favour of the Appellant.

AI Summary

Reverse charge liability: if the service provider paid tax and revenue accepted it, the recipient need not pay again. Where the service provider deposits service tax and the revenue accepts it, the tax cannot be demanded again from the service recipient under the reverse charge mechanism; recipients should obtain written declarations and proof of payment, and ordinarily discharge only their share under reverse charge going forward.