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  1. 300 to 500 words answer
  2. Example to explain the calculation
  3. Reference of circulars and case laws ( IF available)
  4. Explanation of main points of questions
  5. The answer will be prepared by experienced Chartered Accountants.

 

Here is the sample of question and answer.

TAX MASALA paid CA opinion service

Question:

We are paying two things to manpower agency (Rembursement of salary for the employees provided and Service charge of 10% for there service of providing the manpoer….On what value service tax will be applicable (on full value of invoice or only on service portion).

 

Answer:

Scope of manpower service:

When individuals are contractually employed by the manpower agency and the agency supply their services to other organization. Employer employee relationship is existed between manpower agency and the individual. Manpower agency is supplying manpower services to other organization. So here service tax liability will be arisen.

 

Service tax percentage:

Service tax percentage for manpower supply is 12.36% up 31 May, 2015. From 1st june, 2015, it is 14%.

Reverse charge mechanism in service:

Full reverse charge mechanism is applicable in manpower supply from 1st April, 2015.

This chart can show the RCM applicability. Rate is considered at 14% (latest rate)

Service providerService receiverService tax charged and payable by service providerService tax payable by service receiver under RCM
IndividualIndividual14.00%0%
IndividualHUF14.00%0%
Partnership firmBody corporate0%14.00%
Partnership firmIndividual14.00%0%
Body corporateBody Corporate14.00%0%
individualBody corporate0%14.00%
IndividualPartnership firm14.00%0%
Body corporateIndividual14.00%0%

 

Value of taxable service:

Value of taxable service will include the following:

As per clarification by department via M.F.Dr. letter F.No. B 1/6/2005-TRU dated 27.07.2005 that service tax is to be charged on full value of consideration for the supply of manpower, whether full time or part time.

So in value, salary or wages of employees plus service charges should be considered as total taxable value.

EXAMPLE:

Bill is Rs. 220000. Segregation of which is

Employee salary200000
Service charge20000
Taxable value for service tax purpose220000

 

 

Abatement :

Abatement is not available for manpower supply service.

Answer to question:

The answer is that you are required to pay service tax on total value which is reimbursement of employees plus service charges 10%. It is irrelevant that service provider segregates the value of service.

Reference:

http://www.servicetax.gov.in/st-profiles/manpwr-recruitmt.pdf

Point 2.2 – manpower recruitment service

http://www.knowledgebible.com/forum/showthread.php/7201-012-Service-Tax-Circulars-Year-2005-Service-tax-instructions-D-O-F-No-V-DGST-21(9)-B-amp-F-Services-2-2004-18398-dated-18-1-2005-of-D-G-S-T

 

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