Service Tax liability on Reverse Charge mechanism

[Bhairob Chandra Bor]

Dear Sir,

1. we are under construction of a factory building. contractor is charging service tax @12.36% (i.e 100%) on the bills raised by them. we are being paid the said service tax along with the payment of the bills. as per reverse charge mechanism service receiver is liable to pay service tax 50% of the total service tax applicable. in this case are we be liable to deposit service tax even though we are paying service tax through the contractor? Request to advice us urgently.

2. in the same construction our landlord (it's a lease hold land) is bearing the building construction cost . other cost like electrical, interior etc we are bearing. landlord's portion we are paying directly to the contractor. as per agreement this amount will be treated as a interest bearing security deposit and will be recovered from the future rent bill. land lord is an individual and not liable for tax audit under the income tax act. in this case are we liable to deduct TDS on the amounts directly paid to the contractor on behalf of the land lord? kindly advise.

kind regards,

bcb

AI Summary

Reverse charge mechanism for works contract services applies when provider is individual/HUF/partnership and receiver is a corporate.
Reverse charge liability for the service portion of works contracts applies only where the provider is an individual, HUF, or partnership firm and the receiver is a registered body corporate; otherwise the provider may charge full service tax. When the receiver is not the specified corporate entity, reverse charge does not apply.