Impact of Change of Service tax liability structure from partial reverse charge to full reverse charge on manpower SUPPLY AND SECURITY services in transition period

As discussed Supra, Notification No. 30/2012-ST dated 20-06-2012 has been amended vide Notification No. 7/2015-ST dated 01-03-2015, there by shifting the Supply of Manpower and Security services from Partial Reverse Charge to Full Reverse Charge. The stated change will be effective from 01-04-2015.

At present, Service tax liability in respect of Manpower supply and Security services are distributed as follows:

S. No. Description of Service Percentage of Service tax payable by the person providing service Percentage of Service tax payable by the person receiving the service
8 In respect of  services  provided or agreed to be provided  by way of supply of manpower for any purpose or security services 25% 75%

 However, effective from 01-04-2015, 25% of the Service tax which was earlier liable to paid by service provider will be shifted in the hands of service recipient, thereby increasing the effective Service tax liability to be paid by service recipient from 75% to 100%.

Transactions for Manpower supply and Security services entered on or after01-04-2015 would not pose any problem and manifestly the service receiver would be liable to discharge 100% Service tax under Reverse Charge. But on scrutinizing the stated change in the light of provisions of the Point of Taxation Rules, 2011 (“the POT Rules”), there are chances of turmoil being faced by the service receiver in respect of transactions made in the transitional period. It is likely that the Department may dispute the tax rate at which the service recipient is required to discharge Service tax i.e. at 75%/ 100% for the services provided before 01-04-2015 and invoices/ payments made on or after 01-04-2015.

Before taking deeper dive into the area of turmoil which may crop up pursuant to stated amendment, it is apposite here to have an overview of the Point of taxation as governed under POT Rules. As we all are aware that earlier Service tax was payable on receipt of payment in respect of taxable services provided. But with the introduction of the POT Rules, now Service tax payment is made on accrual basis in terms of the provisions contained under the POT Rules. The general Rule 3 of the POT Rules stipulates that Point of taxation shall be the earlier one among raising of invoice or date of making the payment. Further, if the invoice is not raised within 30 days (45 days) from the date of completion of provision of service, Point of taxation shall be the date of completion of provision of service.

However, Point of taxation for Reverse Charge situation (full/ partial) is governed by Rule 7 of the POT Rules which stipulates the date of making payment as the Point of taxation. Further, in case the payment of the aforesaid invoice has not been made within a period of 3 months from date of invoice, then the provisions of Rule 3 of the POT Rules will supersede Rule 7 thereof.

Key Concerns:

In cases where the provisions of services are completed on or before to 31-03-2015 but the payment for the same is made on or after 01-04-2015, disputes can arise as to who is required to discharge 25% Service tax liability:

Invoice is issued on or before 31-03-2015 but payment is made on or after 01-04-2015

In such case, service provider is liable to pay 25% in terms of Rule 3 of the POT Rules. However, since payment is made on or after 01-04-2015, the Department may invoke Rule 7 of the POT Rules and allege that the service receiver is liable to pay 100% in view of the amended provisions as the date of payment is the Point of taxation.

Invoice is issued on or after 01-04-2015 and payment is also made on or after 01-04-2015

Here following two situations may arise:

a) Invoice is raised within 30 days of date of completion of service – Clearly, service receiver will have to pay 100% Service tax;

b) Invoice is not raised within 30 days of date of completion of service – Here again, service provider is liable to pay 25% in terms of Rule 3 of the POT Rules. However, since payment is made on or after 01-04-2015, the Department may invoke Rule 7 of the POT Rules and allege that the service receiver is liable to pay 100% in view of the amended provisions as the date of payment is Point of taxation.

Invoice is issued on or after 01-04-2015 but payment is made on or before 31-03-2015

Since, payment is madeon or before 31-03-2015, liability of service receiver would be to deposit Service tax at 75% in terms of Rule 7 of the POT Rules. However, the Department might raise an issue that since the invoice is raised on or after 01-04-2015, discharge of Service tax should be governed under the new provisions i.e. 100% by the service recipient only.

Conclusion:Therefore this issue needs to be handled appropriately and it is expected that the CBEC should clarify this issue at the earliest to avoid any unnecessary litigation.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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57 responses to “Impact of Service tax changes on Manpower Supply & Security Services”

  1. SANJAY TALE says:

    service tax of manpowr supply services. pl tell me about GST RATE OF MANPOWER SUPPLY AND PL PROVID CURCULOR GST RATE FOR MANPOWER SUPPLY

  2. Mohit says:

    security supply in service tax how much charges

  3. KUBENDIRAN K says:

    Sir,
    We are manufacturing Government Company. we are engaging security guard board mubai . Now the service receiver is paying 100% on RCM. Please give the details in GST, whether Service Receiver or Service provider will make taxes on Security Guard.

  4. arjun says:

    Dear Sir,

    I am providing man power services to a person outside India.

    Am I liable to pay Service Tax?

    If I can claim Exemption on Export of Services, how shall I file my Service Tax Return?

    • shrikant khamborkar says:

      is manpower supply service is notified under gst ,for reverse charge mechanism. if yes, what are provisions,

  5. gopal mishra says:

    we are manpower supplier pvt ltd & partnership firm both please make arrangement to inform the GST rate w.e.f 01.07.2017 whether paid by service recipient or service provider

  6. Ankur says:

    I want to know Whether service tax is applicable on PF/ESIC amount charged by the labour contract?

  7. C.Chandra Sekhara Rao says:

    Is there any right for private limited security services to collect Service tax on Security supply to a manufacturing industry.

  8. SEBIN MATHEW says:

    Is there any exemption of Service Tax on Security and personnel services provided to Central University of Kerala??

  9. Prramodh Mokaashi says:

    one of our client is providing service of Manpower supply to Gref Centre, (A. Govt Body.) and the client had charged full service tax in the bill every month, whereas it should be 25% of 100%. Now the isue is Gref centre has already made the entire payment to client including service tax @ 12.36% and further it has been confirmed by the Gref Centre that they do not have the Service Tax regn no to deposit the service tax under RCM @ 75% of 100%. The client is ready to pay the entire amount with the late payment of interest . he will make the payment within a day or two. Now, while submitting the ST Return for the fy 2014-15 how to show the entire scenario.. please guide -my email addres is isbmmedia.ptu@gmail.com

  10. mahesh vm says:

    under manpower supply service tax and TDS also calculated on the bill amount issued by the party.but sir if the party issued bill amount and attach some reimbursement expenses bill.sir pls tell me if this bills have TDS and service tax applicability.here tds and service tax calculated by only the actual bill amount.if it is possible or not.tell me a answer

  11. CA MAYANK says:

    DEAR SIR
    IF A COMPANY RECEIVED MANPOWER SERVICE.BT SUPPLIER IS NOT PROVIDE INVOICE STATED SERVICE TAX.UNDER RCM STILL COMPANY LIABLE TO PAY ST.

  12. Group 1 says:

    kindly advice service tax has to be calculated on gross bill value or any service charges

  13. Rahul Sharma says:

    Kindly confirm the applicability of RCM on Recruitment Services where the Service provider is LLP. Revised notification (2015) states 100% RCM for Supply of Manpower services, that too if Service provider is a proprietorship firm, Partnership firm, AOP, HUF. Does not mention anything for LLP/Company(Body Corporate).
    Please help clarifying

  14. upender says:

    Is is mandatory to file the service tax returns by the man power service provider.Whereas service tax is being deducted from bills by the services receiver.

  15. Preeti Choubey says:

    In manpower supply service previously we were covered under partial reverse charge of 25% now after amendment it got under 100% reverse charge.
    Where do we have to mention the turnover of 100% reverse charge while filing Service tax return?

  16. B.L.Garg says:

    In case of Manpower, now there is 100% reverse charge in case of Partnership firm ( if billing to Corporate). But during the filling of ST-3, reverse charge shows 25%. How we can file our ST-3?

  17. ankit garg says:

    sir,
    we want to know that if we as a company provides the service of Erection to the govt. department then on raised bills who will liable to deduct service tax on receipt and under which section.

  18. Susanto Mukherjee says:

    lease Let me know the Percentage for payment the service tax head wise.
    Service recipient Portion: a pvt ltd co,
    1.Man Power Supply (repair maintenance machine or any factory related repairing)————
    2.Security__________
    3.machine erection____________
    4.Work contract service with materials——
    5.Legal consultancy Service—————–
    6.Car hair for client (business promotion)———
    7.Hotel bill for client business promotion———

  19. Bappa Das says:

    service tax calculation of security guard payment by a company

  20. PRAKASH LONDHE says:

    Sir tell me clarify that now after 01-04-2015 Service tax liability 100% on service receiver on manpower service & Security service categary ? So, this 100% paid service tax amount to credit by him?

  21. SHASHI KUMAR SINHA says:

    It should be shown as taxable…..

  22. Ankur Dutt Sharma says:

    Dear sir i want to know that can we take credit of service tax of manpower consumed my contractor for making new building.

  23. Ruchi says:

    How to generate bill Recruitment Charges PAN No is under company.

  24. Anil says:

    Please Let me know the Percentage for payment the service tax head wise.
    Service Provider Portion:
    Man Power Supply & Security__________
    Construction_____________
    Work contract service————–
    Advocate Service—————–
    Service Recever Portion
    Man Power Supply & Security__________
    Construction_____________
    Work contract service————–
    Advocate Service—————–
    – See more at: http://taxguru.in/service-tax/impact-service-tax-manpower-supply-security-services.html#sthash.EpGN8zHw.dpuf

  25. SARAYU says:

    Sir, My doubt is whether a service receiver who pays service tax on manpower supply can take credit of the service tax paid since we are a manufacturer.

  26. deepqk says:

    Dear Sir,
    Please tell me for tds which amount dedicated.
    basic. 8100
    esi 375
    epf 1082
    service tax 1134/-
    service chares 810/-
    total:- 11501/-
    so which amount tds dedicated. ?

  27. VK says:

    We are a partnership firm and have been using the services of a security agency. The bill that has been presented before us is somewhere on these lines

    Reimbursement of wages of

    1) Security Guard 10434 (Calculated on basis of no. of days)
    2) PF Contribution on the wages @ 13.61% 1420
    3) ESI Contribution on the wages @ 4.75% 496
    4) Service Charge @ 15% on the wages of Security Personnel 1853

    Total 14203

    Service Tax @ 14% 1988

    Final Total RS. 16191

    I am not totally convinced with the way the calculation is done especially the service charge part which has been calculated on the wages+PF+ESI and that too at 15%.

    Can someone please help me and clarify my doubts regarding this.

  28. pramod says:

    want to know how much percentage for manpower supplier w.i.f.from 01-june.15

  29. Subhash says:

    Dear sir,

    I am an student of CA Final (as article )
    I read your Article on Taxguru regarding Service tax.
    During the course of audit we observed that in case of manpower Supply Service provider issued bill for the month of march.2015 Bill dated 31/03/2015 and Service receiver also entry has been made in the books on same date i.e. 31/03/2015 but payment has been made on 7/04/2015.
    Service provider Charged in bill ,Service tax @12.36% of 25% of Gross amount and service tax paid paid by service provider under RCM @12.36%of 75% of Gross amount.
    As we know that under RCM Point of taxation is arises on date of payment (as per point of taxation Rule 7), then double taxation will arises .
    How can I handle this matter .

    Please help me in this regard

  30. VIKASH DADHICH says:

    PLEASE TELL ME SERVICE TAX LIABILITY ON FABRICATION ERECTION OF MS PIPES LINE WITH CONSUMABLES AND LABOUR,WHEN CONTRACTOR IS DOING ERECTION WORK AND MATERIAL IS PROVIDED BY US…..IS THIS WORK CONTRACT , IF YES THEN PLEASE TELL US THE SERVICE TAX LIABILITY ON THIS SERVICE

  31. S.N.SINGH says:

    Please Let me know the Percentage for payment the service tax head wise.
    Service Provider Portion:
    Man Power Supply & Security__________
    Construction_____________
    Work contract service————–
    Advocate Service—————–

    Service Recever Portion
    Man Power Supply & Security__________
    Construction_____________
    Work contract service————–
    Advocate Service—————–

  32. Mahendrakumar says:

    I am the director of the pvt ltd co. and also a proprietor of a manpower concern shall I eligible to charge service tax on full reverse charge mechanism for the both the concern.

    Please help

  33. Sanjay Sharma says:

    Sir, I want to know that service provider of manpower supply is BOdy of Individual(PAN=bolBs),whether we need to create RCM liability

  34. PANKAJ says:

    if i raised any bill of upkeep in cement mill so how will charged service tax.
    I have manpower suppy, maintanence, & erection & fabrication Services register in the service tax act.

  35. avinash patole says:

    Dear Mr. Rakesh singh,

    you will have to pay service tax on total gross value of bill i.e.

    Salary , wages + 10% service charges.

    paying tax Only on Agency charges will be not accepted by S.Tax Dept.

    I had face this problem in past.

  36. Anil says:

    We are making payment to security agency for our apartment security, and payment for the year will be less than 6,00,000.00 are we liable to pay service tax or we will get benefit of 10,00,000.00 limit.

  37. MITA HAZRA says:

    Sir
    I am working in a Ltd company where we take service from Manpower supplying agency ( security & labour for our mill ). We pay service tax on bill value 3.09% (i.e. bill value x25% x 12.36% ). is it Right? Please clarify how can I calculate Service tax on their bill which we will paid to Govt tresury.
    Thanks & Regards
    Mita Hazra

  38. MITA HAZRA says:

    Sir
    I am working in a Ltd company where we take service from Manpower supplying agency ( security & labour for our mill ). We pay service tax on bill value 3.09% (i.e. bill value x25% x 12.36% ). is it Wright? Please clariry how can I calculate Service tax on their bill which we will paid to Govt tresury.

    Thanks & Regards

    Mita Hazra

  39. YOGESH KUMAR SHARMA says:

    if service tax don’t deposited on manpower supply from 01/07/2012 to 31/03/15 then how much penalty liabilities imposed.

  40. NIRAV MEHTA says:

    COMPANY A – BUILDER & HE IS BODY CORPORATE
    INDIVIDUAL MR. B – CONTRACTOR FOR MANPOWER SUPPLY
    INDIVIDUAL MR.C – SUB CONTRACTOR OF MR. B. FOR MANPOWER SUPPLY.
    IF A GIVES CONTRACT TO MR. B FOR Rs. 3000000/-; UNDER REVERSE CHARGE MECHANISM.
    MR. B ON HIS OWN CAN COMPLETE CONTRACT FOR Rs. 1800000/-; AND HE GIVES SUB CONTRACT TO MR. C FOR BALANCE RS. 1200000/-.
    NOW QUESTION IS WHAT ARE THE SERVICE TAX LIABILTY OF ABOVE A, B, and C ?
    KINDLY REPLY ME ON MY MAIL ID.

  41. anand says:

    We have received the Invoice for security charges FROM LIMITED COMPANY for the month of April’2015 with CHARGING 12.36% service tax.
    Here who is responsible to service tax ? Service provider or Receiver ? plz guide.

  42. T.ESWAR RAO says:

    Dear Sir,

    We are a reistered partnership firm received security service provider’s Invoice for the month of April 2015 in which he has charged 100% (@12.36) Service Tax. Our Service tax provider is a Individual and shall we pay the bill is with service Tax or deduct the Service tax from the bill and pay the Service Tax from our end. Can you clarify please.

    With regards

    T.ESWAR RAO
    9849991083

  43. R N PRAKASH says:

    ir
    We have received the Invoice for Man power supply but Invoice is for the month of April’2015 Invoice raised date is 8/5/2015.We agree that Service receiver has to pay 100%.When should we make this Service tax payment.Please help in this regard.

    with regards,
    Prakash.R.N.

  44. Rakesh singh says:

    Dear sir.
    We pay to house keeping agency in two components 1- wages to 18 staff as per the rate decided by the labor commissioner, Maharashtra
    2- management charge paid to agency as per wagess Basic + DA = 8000 after PF,ESIC, PT Deduction balance amount they are paying to staff . and we are provide Agency charges to agency 10 % on Gross .
    sir My Query- Service tax is payable on both are only on Agency charge as the wages are paid directly in the accounts of the staff . Kindly Advise Thanks

    • MAHENDRA says:

      SERVICE TAX @14% CHARGE ON HOUSKEEPING SERVICE BILL WHO WILL BE PAID THIS SERVICE TAX LAIBILITY SERVICE RECEIVER OR SERVICE PROVIDER

  45. Rakesh singh says:

    Dear sir.
    We pay to house keeping agency in two components 1- wages to 18 staff as per the rate decided by the labor commissioner, Maharashtra

    2- management charge paid to agency as per wagess Basic + DA = 8000 after PF,ESIC, PT Deduction balance amount they are paying to staff . and we are provide Agency charges to agency 10 ? on Gross .

    sir My Query- Service tax is payable on both are only on Agency charge as the wages are paid directly in the accounts of the staff . Kindly Advise Thanks

  46. R N PRAKASH says:

    Sir

    We have received the Invoice for Man power supply but Invoice is for the month of April’2015 Invoice raised date is 8/5/2015.We agree that Service receiver has to pay 100%.When should we make this Service tax payment.Please help in this regard.

  47. manoj shrivastav says:

    We pay to security agency in two components
    1- wages to 18 security gaurds as per the rate decided by the labour commissinor, m.p.
    2- management charge paid to security agency as per tender document(30,000 pm)
    My Query- Service tax is payable on both are only on management charge as the wages are paid directly in the accounts of the gaurds.
    Advice solicited.
    Regards.

  48. kishor says:

    service tax of manpowr supply services. pl tell me about service tax baifrication i e service tax, edu cess and cess

  49. Gurtinder Singh says:

    Sir please clarify that now after 01-04-2015 Service tax liability 100% on service receiver on manpower service & Security service categary so need necessary to continue service tax registration number of service tax provider. service tax provider number surrender or not.

  50. Vipul Pagar says:

    Sir tell me it is require to continue Service tax number of manpower & Security Service catagory Surrender or not

  51. Vipul Pagar says:

    Sir Tell me clarify that now after 01-04-2015 Service tax liability 100% on service receiver on manpower service & Security service categary so need necessary to continue service tax registration number of service tax provider. service tax provider number surrender or not

  52. rdk says:

    Tell me this is related to only proprietor concern or its applicable to Pvt Ltd company also.

  53. Kumar Mohan Kar says:

    is it correct Rule 7 is applicable for reverse charge mechanism. Because Rule 7 says about “Determination of point of taxation in case of associated enterprises”.

  54. SRIKANT AGARWAL says:

    Very well drafted note particularly the issues w.r.t timing of billings and explaining the issues with practical example.

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