Service Tax Payment Under Reversed mechanism Charge, Service Tax

[Rahul Patel]

Sir,

we have paid service tax under reversed mechanism charge on Legal Service , Man Power Work Contract , Director Sitting Fee etc.

my query is:

if we made any advance payment to any contractor who supply us manpower or we made advance payment to an advocate,

is service tax applicable on advance payment?

if service tax is applicable on advance payment then, when we take CENVAT Credit of  Service Tax Paid amount?

Regards,

Rahul Patel

Posts / Replies

[Pradeep Khatri]

Dear Rahul,

Making advance payments to service provider comes under the purview of Finance Act, 1994 on which service tax is payable as Point of Taxation would be applicable. Even under RCM you are liable to pay the service tax on the advance payments made by you to your service providers.

In our view, you may avail the CENVAT credit after the completion of Services or after the issuance of Invoice/Bill.

Regards,

Team YAGAY & SUN

(Indirect Tax Consultants)

[Rahul Patel]

Dear Sir,

Thanks for the opinion please also let me know that at the time of received of invoice which amount i have pay service tax.

manpower invoice --> 75 percent of Service amount or Total Service Amount Less Advance & then 75 percent of service amount?

Regards,

Rahul Patel

[Priyesh Agrawal]

take a example -  u paid 50 as advances... ur liability comes to (50*75 percent )*12.36 percent i.e., 4.64 Rs.

Final invoice raised for Rs. 150 (excluding ST of Labour Supplier) than u would pay to him Rs. 100 only... In this case u are liable to pay service tax on 100 Rs.  i.e., (100*75 percent )*12.36 percent which comes around 9.27 Rs.

[Harish Lath]

Yes you can make payment of service tax on advance payment and the you can take the Cenvat Credit of Service Tax deposited on advance payment. There is no bar in Cenvat Credit Rules' 2004