Tax share of service recipient

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SummaryQueries on taxation and service tax liabilities, addressed by Vivek Sharma & Manav Saneja of Ernst & Young

Our company is engaged in the hospitality business and is in receipt of manpower crew for housekeeping services in New Delhi. Our annual total taxable turnover has never exceeded R7 lakh and accordingly, we do not hold a service tax registration. We understand that with the recent amendment in the service tax laws, with respect to manpower supply services, the service recipient is also liable to pay service tax under the reverse charge mechanism. Are we also covered under the recent amendment and liable to pay service tax? Also, whether, we as service recipients can avail of the SSI exemption of not paying service tax, taxable turnover being less than R10 lakh. Kindly advise.

It has been notified that with effect from July 1, service tax liability arising on account of supply of manpower services shall be borne partially by the service recipient under the reverse charge mechanism, provided that the services are rendered by an individual, HUF, partnership firm or an Association of Person. The share of service tax liability to be borne and paid is in the ratio of 75% by the service recipient and 25% by the service provider.

Accordingly, share of liability to be borne by your firm, being the service recipient, would be 75% of the total service tax liability. The service tax so paid would be available as credit to your firm.

The liability of the service provider and service recipient are different and independent of each other. Thus, in case the service provider is availing of exemption owing to turnover being less than R10 lakh, he shall not be obliged to pay any service tax. However, irrespective of the total taxable turnover of the service recipient, the service recipient needs to pay his share of service tax (i.e. 75% in case of manpower supply services) under the partial reverse charge mechanism.

MRP-based valuation

Our company is engaged in manufacture of adhesives and we sell the products in the retail market. We pay excise duty on MRP as the product is classified under the third schedule of the Central Excise Tariff Act, 1944. However, in recent times. We have started getting purchase orders from industrial buyers who buy in bulk. We have come to know that duty computation on MRP is not applicable in the case of industrial sale. Please advise.

Section 4 of Central Excise Act, 1944 (CEA) provides the basis for determining the assessable value for

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