Payment of Service Tax

[kiran pai]

Dear Sirs,

We are the receipient of a security agency service in our HO at Mumbai.  The said agency is changing the service tax on the gross value of the bill for the concerned month.  Now my queiry is that, the gross amount inclusive of salary of the security guard, other statutory obligations like ESIC, PF, Professional tax LWF etc.  Then why we have to pay the tax on these above mentioned elements.  Why not only on  the service charges?

Please clarify my doubts

Thanks,

Kiran Pai.

[Surender Gupta]

Here the liability to pay ESIC, PF etc is on employer. As long as as service is concerned, it is the gross value charged which is taxable. If the service provider is charging value of its services by bifurcating the element of services, it can not absolve from the liability of service tax in the name of statutory levies.

[DEV KUMAR KOTHARI]

I agree with reply of Shri Surendra Gupta.

 

You are availing services of Security Agency. Security agency is employing people as guards/ security man/ suprevisor etc. and deploying them at your office. There is no fixed person to act at your place. The security agency is employer of the people deployed. Theefore, gross charges are correctly considered as 'value of security services' provided by security agenncy to you.

In case you employ your own people and pay salary to them and incur statutory levies and get only expertise from security agency for supervision etc. then position will be different. In that case, only service charges levied by agency may be taxable service charges.

IN-HOUSE services can be used to save service tax.

 

AI Summary

Service tax on security services applies to gross charges including wages and statutory levies; bifurcation won't avoid tax. Where a security agency employs and supplies guards, the total consideration it charges-including wages and statutory employer contributions-constitutes the value of the security service for service tax; bifurcating salary or statutory levies does not exclude them from the taxable base, though if the client directly employs staff and the agency provides only supervisory expertise, only the agency's discrete service charges may be taxable.