Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include audit, management consultancy, tax consultancy, accounting services, secretarial services, etc. Our team consists of distinguished Chartered Accountants, Company Secretaries, Cost and Management Accountants, Information System Auditors and other professionals who are skilled to offer sound financial advice and customized services. We at Sandeep Ahuja & Co. have regular interaction with regulatory authorities, industry experts and other professionals, which enables us to keep pace with recent developments and to serve our clients in the best possible way.

Monday, August 6, 2012

Service Tax on Manpower Supply Services


As per the Service Tax Notification No. 30/2012 dated 20th June 2012, reverse charge mechanism of service tax has become applicable on a few services w.e.f. 1st July 2012, including manpower supply services. Under this scheme, service tax is payable to some extent by the service recipient instead of the whole amount being paid by the service provider. The service receiver has to register himself under service tax. Further, the service receiver cannot claim general exemption limit of Rs. 10,00,000, therefore he has to pay service tax even on a few rupees worth of service received.
Services provided or agreed to be provided by way of supply of manpower for any purpose are taxable under the service tax law, wherein 25% of the service tax payable will have to be deposited by the person providing service and 75% of the service tax payable will have to be deposited by the service receiver.
However, it is to be noted that the reverse charge is applicable only if the service receiver and the service provider satisfy a few conditions, which are as follows:

·         The service provider is an Individual (proprietor), or partnership firm (registered or unregistered) or an HUF.
·         The service receiver is any company formed or registered under the Companies Act, 1956 or a business entity registered as body corporate located in the taxable territory.

In case the abovementioned conditions are not satisfied, the service provider has to pay tax on the full amount of service.

Therefore, if a person (body corporate/company) is receiving services of manpower supply, then it must register itself for service tax. And, if it has already registered itself under the service tax act and is receiving these services, then it has to add this specific service in its service tax registration certificate.

Example: If manpower supply services worth Rs. 1000 are supplied by an individual, partnership firm or HUF, to a company or body corporate, service tax @12.36%*25%*1000 (Rs. 30.9) will be deposited by the service provider, and  @12.36%*75%*1000 (Rs. 92.7) will be deposited by the service receiver.
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5 comments:

  1. What if service provider is a Pvt. Ltd. company?

    ReplyDelete

  2. Service provider pay service tax on full amount

    ReplyDelete

  3. What if Service receiver is non resident ?
    Export of Man power service will be taxed for service Tax ?
    I have an employed a person who will supervise in Sri Lanka i.e. outside India. The employee and myself (partnership firm) are Indian resident. I guess this should be exempt from tax. Any suggestions ?

    ReplyDelete

  4. what if the amount of service tax is not separately mentioned in the invoice? all other conditions being satisfied.

    ReplyDelete

  5. does the company (service recipient)get 75 % or 25 % or 100 % input tax credit?????

    ReplyDelete

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