Service under Reverse charge mechanism

[Ganeshan Kalyani]

Dear Experts,

I would like to discuss on Service Tax applicability under below given scenario:

Suppose, a service provider (say ‘A’) who as ‘pure agent’ has arranged ‘legal consultancy service‘ from Advocate (say ‘B’) for actual receiver of service (say ‘C’). Here, ‘B’ has raised invoice on ‘A’ who in turn has raised an invoice on ‘C’ with actual cost basis and no profit element. The description on invoice appears as ‘reimbursement of legal consultancy service’. Now, the question is who will have to pay service tax.

Here no doubt ‘legal consultancy service’ is covered under reverse charge mechanism. Primarily 'A' has availed or arranged service from 'B' for 'C'. Hence 'A' is just acting as 'Pure Agent' and ultimate receiver of service is 'C'. Hence in my view 'C' is suppose to pay service tax.

Request you all to share your views in this regard.

Thanks.

AI Summary

Reverse Charge Mechanism: When Ultimate Receiver Pays Service Tax and Role of Pure Agent in Tax Valuation A discussion forum explores the applicability of service tax under a reverse charge mechanism involving a service provider (A), an advocate (B), and the ultimate service receiver (C). The consensus is that A acts as a pure agent, and C should pay the service tax. If A charges more than B's invoice, A must pay the tax and collect it from C. The discussion also touches on intermediary services and the complexities of service tax valuation, particularly in works contracts. Participants share insights on handling service tax, valuation rules, and the implications of willful and unintentional tax evasion.