Dear Sir,
My organization is working in Orissa on disaster management. We availed services from one agency (local based) and their total bill throughout the financial year crossed Rs. 14 lakhs . Agency is not claiming the service tax. Please let me know , if agency does not claim service tax if their total bill amount exceeds Rs. 10 lakhs in a financial year then whether reverse liability will come on us ? Since we are registered NGO of orissa and we do not want to violate any rules. Whether paying service tax liability will come on us at any point of time ?
Sincerely
Rajiv Kohli
rajivkohli2002@yahoo.in
Dear Mr Kohli,
To answer your query properly, one will need to know the type of services the agency you have hired is rendering.
I can feel there is some non-clarity on certain issues, hence some clarifications. First of all if service tax is payable by a particular assesss then only that organisation is responsible for non-payment. If the department subsequently raises demand against the concerned agency for non-payment of service tax, he could come back on personal grounds but he cannot legally demand service tax, once he has submitted invoices without service tax.
Generally service tax is payable by service provider, however under reverse charge mechanism, Service tax legislation imposes responsibility of making service tax payment by service recipient. Logic being that there are certain types of service providers (e.g. Goods transporters) who the authorities feel they are not a organised lot and it would be difficult to collect service tax from them, hence it is trying to collect the same from the service recipient. However as stated above to clarify correctly, we would need to know the type of service that you have taken from this agency.
The service tax liability comes on the service provider when crossing Rs 10 limit first time. These are broad provisions, however the act provides for service tax liability (called reverse tax liability) in very few cases on the person who avails services but percent varies from service to service. Please refer service tax provisions in this regard for details.