payment of service tax on reversed charge method.

[vinay wakde]

Some of our service providers covered under works contracts were not crossed  the turnover limit of  Rs. 10 Lacs in previous financial year 2011-12. Hence, they have not taken any service tax Registration. In the matter kindly clarifiy the following points :-

1. Whether the service recipient has to pay 50% service tax on works contract under reversed charge method after 01.07.2012?
2. The service provider is exempted from payment of Service Tax, as he has not crosses the turnover limit of Rs. 10 Lacs,  Whether the service recipient is eligible to take input service credit  after payment of 50%  service tax on reversed charge method ? 

Regards,

VINAY

AI Summary

Debate on Reverse Charge: Must Service Recipients Pay Tax if Providers Are Exempt Due to Low Turnover? A discussion on the payment of service tax under the reverse charge mechanism highlights differing opinions on whether a service recipient must pay service tax when the service provider's turnover is below Rs. 10 lakhs and thus exempt. One view, supported by several contributors, is that the service recipient is liable to pay 50% of the service tax and can claim input credit, even if the provider is exempt. Another perspective argues that no tax should be levied if the service provider is exempt. The discussion references various sections, notifications, and guidance notes to support these positions.