Service Tax on ESI and PF Reiumbursement to manpower agency under RCM

[Raghu K]

Dear Experts,

One of the agency providing manpower supply to our company. Monthly they give two seperate bills.

Bill 01 - for Labour Charges

Bill 02 - for ESI and PF Reiumbursement

We paid ST under RCM on bill 01 and we took CENVAT on the same. but we have not paid ST under RCM on bill.02 because they raise seperate bill for that with supporting documents like, ESI,PF, PT paid challans, attendance sheet, salary sheet.

Pls clarify wheather ST is applicable on ESI & PF reiumbursement under RCM.

regards

Raghu

[KASTURI SETHI]

As per definition of Section 67 amended w.e.f. 14.3.15, ST was appliable on gross amount charged. No deduction is allowed on account of ESI and PF.

(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.

Explanation. - For the purposes of this section, -

(a) [“consideration” includes -

(i) any amount that is payable for the taxable services provided or to be provided;

(ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed;

(iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.’.]

[(b)  *  *  *  * ]

(c) “gross amount charged” includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called “Suspense account” or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]]

[Ganeshan Kalyani]

The change is w.e.f. 14.05.2015. The querist has to check to which period his service pertains to.

AI Summary

Service Tax Under Reverse Charge Mechanism Applies to ESI and PF Reimbursements Under Amended Section 67 A company queried whether service tax under the Reverse Charge Mechanism (RCM) applies to Employee State Insurance (ESI) and Provident Fund (PF) reimbursements billed separately by a manpower agency. They paid service tax on labor charges but not on ESI and PF reimbursements. An expert clarified that, according to the amended Section 67 effective from March 14, 2015, service tax applies to the gross amount charged, including reimbursable expenditures like ESI and PF. Another expert advised checking the relevant period of service to determine the applicable rules, as changes took effect on May 14, 2015.