Service Tax on Reverse Charge and SEZ Unit

[Ashok Chopra]

Respected Forum,

I am a SEZ Unit availed services of Manpower Recruitment. Service Provider is not having Service Tax Registration, hence not charged any service tax on the amount of Bill. No formality of A-1 and A-2 has been done. This service comes under Reverse Charge Mechanism.

My query:-

1. Whether I am liable to pay Service Tax on the amount of Bill?

2. If yes, should i pay with interest?

3. Being SEZ unit, can i get refund of this amount? if yes, please let me know the procedure.

[KASTURI SETHI]

(Assuming that your unit is business entity registered as body corporate). This is serious lapse. However, refund sanctioning authority can exonerate on the basis of evidences available in your books of account and other records as evidence. There are judgements where liberal view has been taken for such lapse. I am of the view that you will get refund after litigation, lapse being of serious nature. First preference is to pay tax with interest because liability is cast upon you

[JSW CEMENTLIMITED]

In my opinion, the list of services which are received for the authorised operation in SEZ are to be approved by the approval committee. (Refer Notification 12-2013-Service tax dated 1st July 2013). Once the same approved vide Form A2, you can file refund of service tax which you have paid. Before filing refund, you have to ascertain that the said service is in the specified service list issued by the approval committee in Form A2. If the same is not there, it will be very difficult to get the refund.

[JSW CEMENTLIMITED]

But as Sh. Kasturi JI has suggested you must make the payment of service tax with interest immediately

[KASTURI SETHI]

I endorse the views of JSW CEMENT LTD. regarding the procedure for claiming refund of Service Tax.

[Venkataprasad Pasupuleti]

Please note recruitment services are not liable under RCM - only manpower supply is liable. Please see Rule 2(1)(g) of Service tax Rules, 1994.

In case your company received recruitment services then no need to pay service tax under RCM

AI Summary

Reverse charge on manpower supply: recipient liable for service tax and should pay with interest; refund depends on approval list. SEZ recipients of manpower supply services where the supplier is unregistered are generally liable to pay service tax under the reverse charge mechanism and should pay tax with interest promptly. Refund eligibility requires that the service be approved for authorised operations by the Approval Committee and listed via Form A-2; if approved, the SEZ unit may file for refund, but absence from the approved list makes refund difficult and may necessitate litigation supported by books and records. Recruitment services, by contrast, are not liable under RCM.