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

Reverse charge: service recipient must pay tax even if provider is below threshold, with cenvat credit available.
When a works contract service is subject to the reverse charge collection mechanism, the recipient must pay the notified portion of service tax even if the provider falls below the small service provider threshold; administrative provisions exclude such transactions from the threshold exemption. The recipient that pays tax under reverse charge is eligible to claim cenvat/input service credit, and invoicing should reflect the taxable value and the allocated tax shares.