Service tax applicability

[Asked by Guest]

I had entered into contract with state government department.The service tax was not applicable on date of tender.Is the state gov. department liable to reimburse service tax to me?

[Surender Gupta]

Please check your contract terms and conditions.

[DEV KUMAR KOTHARI]

In agreements usually it is provided that taxes, duty, cess and other similar levy shall be payable separately as prevailing at the relevant time , even rates are to be charged as per prevailing rate. Suppose ST was not leviable as the rate was nil, it can be considered as new rate being 12.36% so customer should pay it. Uless otherwise stated, all new levies should be paid by customer as per normal commercial trade practices. Check , what has been agreed and what is scope of bearance of such levies by yourself and customer. In case customer is eligible to get CENVAT, usually customers agree to pay new levy like ST so check what is position in relation to your customer who is a Government Department. If they are liable to ST, then there should not be problem in payment of ST by them. Even in case agreement does not provide specifically, you can request the customer to pay new levies as per normal trade practices, and customs.

AI Summary

Service tax reimbursement: new levies are generally payable by the contracting customer unless contract states otherwise.
Whether a state government department must reimburse service tax paid by a contractor depends on the contract terms determining who bears taxes and whether rates apply as prevailing; absent express allocation, commercial practice treats new levies as payable by the customer, especially where the customer can claim CENVAT, and for a government department statutory liability and the department's CENVAT position will influence reimbursement entitlement.