CA Prashant Gupta
Since the introduction of reverse charge mechanism of service tax there are certain issues that is unsolved and no clarification has been provided from the side of department also. As we are trying to correlate the words used in the notification, we have arrived on certain points:-
The main question arise whether the service providers whose gross turnover is less than Rs. 10 lacs has to registered with service tax if they provide services mentioned under reverse mechanism. In my view, the service receiver has to deduct service tax without any monetary ceiling for service tax deduction. Even a small payment of Rs. 1000/- is liable for service tax deduction. In that case, if service receiver and service provider satisfying the basic criteria for reverse mechanism, the service receiver has to register with service tax authorities even the service received by him are less than Rs. 10 lacs. Somehow that is harsh to the person receiving the services, but some relaxation is provided to proprietorship. It may encourage to the persons receiving the small services to divert the service receiver person.
In case of service provider’s where 100% liabilities are laid on the service receiver, there is no liability on the service provider, in that case there is no need for the service provider to register with service tax authorities because no liability is accrue and arise on service provider.
In case, there is partial liability on service provider and service receiver, there is obligation on service receiver to deduct and pay service tax without any monetary ceiling but for service providers the general rule will applicable and the basic ceiling of Rs. 10 lacs is applicable. Hence service providers will save from registration and other formalities till the basic exemption limit i.e. Rs. 10 lacs.
We will hope the government will come with some clarification.