MEANING OF ACTUALLY AND GENUINELY PAID BY THE CONTRACTOR

[RAM AVTAR]

In most of the tender clause says " However , in respect of SERVICE TAX , same shall be PAID by the contractor to the concerned department on demand and it will be REIMBURSED TO HIM by the Engineer in Charge after satisfying that IT HAS BEEN actully and genuinely paid by the contractor

In case of a company tax deposited through epayment, partial reverse charge and CENVAT.

Whether CENVAT credit of bill of sub contractor (either in partial reverse charge for full Credit) will also treated as service tax paid by contractor actually and genuinely

[KASTURI SETHI]

Sh.Ram Avtar Ji,

The purpose of this clause in the agreement means you are chained by noose of law. If any hanky panky happens to the deposit of ST in Govt. account via cyber crime, you (Contractor) will be responsible for that. Contractor will have to take all the precautions.

However, it is pertinent to know the meaning of the words, "Actual and Genuine" As per dictionary meaning :- Actual means based on facts, what is existing etc. Genuine includes the elements of honesty, truth and sincerity, in addition to factual position and not fake.

Payment of ST made through Cenvat Account is equal to the payment made in cash. Legal status is the same. You are to ensure that Cenvat credit to be taken must conform to the definition and conditions laid down in Rules 2,3,4 of Cenvat Credit Rules, 2004 as amended.

Under RCM firstly you will have to pay ST in cash and thereafter you can take credit.

[RAM AVTAR]

Sethi Sir

In Government contracts, CPWD / Railway reimburse service tax only amount of challan submitted duly certified by a Chartered Accountant. while in case of a company sub contractor is liable to pay service tax on his 50% portion and he can discharge his service tax liability by way of CENVAT credit. Whether condition of partial reverse charge of sub contractor by discharge through cash payment is applicable

[KASTURI SETHI]

Sh.Ram Avtar Ji,

Answer to query dated 1.2.16 is 'YES'. The condition of 'through cash' is applicable.It is immaterial whether your client (sub-contractor) is working under full RCM or partial RCM.Actually such prohibition has been imposed on the 'Service Receiver' under RCM by the Govt.

I read your query yesterday but I could reply yesterday as I was very busy.

AI Summary

Reverse charge payment must be discharged in cash initially; Cenvat credit valid only if lawfully taken thereafter.
Contracts stating tax must be "actually and genuinely paid" require factual, honest discharge to government or equivalent lawful discharge. Cenvat credit usage equates to payment if taken in conformity with Cenvat Credit Rules. Under Reverse Charge Mechanism the tax must be discharged in cash first, with credit taken thereafter as permitted. Government reimbursements may require a duly certified challan. Contractors must ensure procedural compliance with Cenvat rules to validate credit-based discharges.