SERVICE TAX INPUT CREDIT

[chandrashekhar bathini]

a company providing construction services to rail vikas nigam limited in ap, this service is exempt from service tax because it providing services to railways.

company receiving manpower services and that company charging sevice tax in their invoice ,my query is we are not paying any output service tax so that we do not pay sevice tax on manpower service received

please give the answer for my query

thanking you

[KASTURI SETHI]

At present 100% Service Tax liability is on the service receiver in respect of Supply of Manpower. However, I request you to elaborate your query so as enable the experts to give fool-proof reply.

[Akash Deep]

Dear

Chandrashekhar,

Just because your output service is non- taxable or wholly exempted from levy of service tax your input services do not automatically becomes exempted or non taxable- you need to look at the taxability of input services independently. if the input service (i.e. supply of manpower) is taxable and covered under reverse charge mechanism (i.e. service provider is an individual or huf or partnership firm and receiver is a business entity registered as a body corporate). you should pay tax without being affected by the fact that your output services are exempted. The illustration added to section 66F w.e.f 14.05.2015 need to be refrred.

"the services by the reserve bank of India, being the main service within the meaning of clause (b) of Section 66D, does not include any agency service provided or agreed to be provided by any bank to the Reserve bank of India . such agency services , being input service used by reserve bank of India for providing the main services, for which the consideration by way of fee or commission or any other amount is received by the agent bank, does not get excluded from lavy of service tax by virtue of inclusion of main service in clause (b) of negative list in section 66D and hence, such service is leviable to service tax."

Regards

Akash Deep

[Rajagopalan Ranganathan]

Sir,

An excellant reply given by Shri. Akash Deep Sir.

[Ganeshan Kalyani]

The query is nicely replied. Thanks

[KASTURI SETHI]

I also agree with Sh.Akash Deep, Sir. Beautifully explained. No doubt concept must be clear to the querist now.

[chandrashekhar bathini]

Thank you so much akash sir, my dout is clarified.

AI Summary

Reverse charge: service receiver must pay tax on manpower supplies even when their output services are exempt.
The taxability of an input service is independent of the output service: supply of manpower subject to the reverse charge requires the service receiver to pay service tax even if the receiver's construction services to the railway are exempt; agency or input services used in providing a negative-list main service can remain taxable when consideration is received by the agent.