Information required for service tax applicability

[Guest]

Hi All

I have a firm that provides security services (security guard, supervisor, houskeeping etc) to organisations on contractual basis. I am planning to register my organisation for serivce tax. But i am facing one problem that some of the organisations who are using my services are not willing to pay me service tax, so my question is am i liable to pay the service tax of the gross ammount which i get from these organisations, or i am liable to pay only the ammount that i get for the organisations willing to give me service tax.

Is there any liability on the organisation using my serivces that they have to pay me service tax if i charge them or they can refuse to pay also.

looking for your guidance

Thanks

Avik

[YAGAY andSUN]

Basically Service provider is liable to charge and service tax except GTA and reverse charge mode etc.  If you have crossed the threshold limit then you must have to get registration at when you reach at Rs. 9.00 lacs limit and start charging at the limit of Rs. 10.00 lacs.  If you charge service tax in your bills then service receiver can't deny to pay it.  Even if you don't charge, then also you are liable to pay service tax from your collections.

[NEERAJ KUMAR, RANCHI]

Dear Avik

As Mr Khatri mentioned if you have crossed the threshold limit of Rs. 10 Lakh it is not time to plan any more, it is not optional that you can register yourself or not, rather it is a statutory requirement. now come to your problem that your service recipients are not ready to pay service tax to you. In service tax,  every service provider liable to pay s tax is required to collect and pay service tax to the account of govt. So eventhough you fail to collect service tax you have to pay the same, Further you are also required to issue invoice mentioning the service tax rate and amount applicable. Department is not going to help you in this regard

In my view if you have agreement with any firm where service tax liability has not been mentioned in payment terms you can pay service tax on the amount after deducting the service tax amount from the  gross amount, what I mean is if you receive Rs 100, pay service tax on the amount 90.66, (service tax 10.3 %), Hope answered your question.

[abhi parakh]

Dear Mr. Avik,

Service Tax Liablity is independent of the trade arrangements that an assessee makes. Once an assessee is liable for registration under the Finance Act 1994 he has to charge service tax on the invoice and deposit the same within the prescribed time period.

Where the assessee fails to charge service tax on his invoice though being liable to do the same or where the service receiver does not pay the amount of service tax, a situation arises wherein reference need be given to the apex court's decision in the case of CCEx vs. Advantage Media Consultant [2009 (14) STR J49 (SC)] wherein the Hon'ble court held that "Where the assessee fails to collect service tax for the services rendered by it or tax is not paid separately by the customer, the total receipts for rendering services should be treated as inclusive of service tax and the service tax be worked out accordingly"

In the aforesaid backdrop the following course of action may be 

CASE 1 - subject to prescribed conditions avail the small service provider exemption u/n no. 06/2005 - S.T. dated 01-03-05

CASE 2 - where purported conditions are not fulifilled (subject to business priorities)  charge service tax on the face of the invoice & collect the same, since in any case same has to be paid to the government coffers

I hope the aforesaid settles the issue, in case of further clarification kindly let me know.

 

Thanks & Regards,

CA Abhi Parakh 

(+91) 92334 23525

[Shruti Gathani]

Hello Mr.Avik,

I agree to what Mr.Pradeep Khatri has guided. I would like to add to it. For your knowledge, it is mandatory to charge Service tax in the Invoice raised by you if you have crossed the limit of Rs.10lakhs. If the client does not pay you the service tax amount, you are not supposed to pay the entire amount as charged in the Invoice to the Govt. but on proportionate basis. (i.e. Service tax payable =Groos Amount received X 10.3/110.3). There is no action against the client for non payment of service tax amount to the service provider, although the benefit of payment on Proportionate basis is available to you.

Thanks,

Shruti Gathani.

[Guest]

Hi Thanks for the clarification. Just one more thing the 10 lakh threshold you mentioned is it Income or turnaround?

[abhi parakh]

Dear Mr. Avik,

Notification No. 6/2005 - S.T. dated 01-03-2005 [as amended] makes mention &/or exempts "taxable services of value not exceeding Rs. 10 lac". The phrase "taxable services of value ..." is to be read as value of taxable services. Hence, the exemption provided is to turnover of output services and not related to income.

Hope, the aforesaid settles the issue. In case of further clarification kindly let me know.

Regards

CA Abhi Parakh

[Shruti Gathani]

Dear Mr.Avik,

As per N/N.6/2005, you are exempt from charging service tax on the invoices raised by you upto Amount RECEIVED (includes arrears of previous year received in the current year) of Rs.10.lacs. This exemption is applicable to you only if the aggregate value of service RENDERRED by you in the previous year does not exceed Rs.10lacs.

To summarise,

1. To check if N/N 6/2005 is applicable to you or not: Check if the aggregate value of service rendered by you in the previous year (whether value thereof is received or not) exceeds Rs.10lacs.

2. If the abovesaid exceeds, then you will not be eligible for any threshold limit of Rs.10lacs and will liable to charge service tax on every invoice raised by you  in the year.

3. If the amount calculated under pt.1 does not exceed Rs.10lakhs, then check the AMOUNT RECEIVED by you in the current year (this amount will include value received for service renderred in the previous year). Exemption is available to you untill this amount received does not exceed Rs.10lakhs. Once you receive any amount greater than this limit, you have to start charging service tax on every invoice raised by you in the current year.

This procedure goes on every year.

Thanks,

Shruti Gathani.

AI Summary

Service tax liability: providers must register and pay tax on receipts even if clients refuse to reimburse. Service providers must register and pay service tax once taxable services turnover reaches the threshold; liability exists irrespective of client reimbursement. The provider must issue invoices showing service tax and, if tax is not collected, treat receipts as inclusive of tax and compute tax accordingly. Notification No. 6/2005 exempts small service providers based on turnover of taxable services (previous year) and amount received (current year); exceeding those limits terminates the exemption and obliges charging tax on invoices.