I am in the business of supplying security guards to companies. From July, the companies have asked me not to charge service tax in my bill, stating they will pay the tax. Please suggest.—Sajith Maroli
As per notification No. 30/2012-Service Tax, dated June 20, if any company whether private or public, makes any payment to an individual, a Hindu undivided family (HUF), partnership firm, body of individuals (BOI), including AOI, for the services received by them under manpower supply, then as per serial no.8 of the said notification, you will have to charge service tax on 25% of the gross amount and the balance 75% shall be paid by the receiving company.
For example, if the gross amount of security guards provided by you is, say, Rs30,000 for September 2012, you will have to charge a service tax of Rs927 (on 25% of 30,000, which is 7,500 @ 12.36%).
You will have to mention on your bill that service tax has been charged on 25% of the gross value and the balance service tax on 75% of the gross value needs to be paid by you as per serial no.8 of Notification No. 30/2012.
If you are a private limited or a limited company, this notification does not hold as this notification is only applicable in the case of an individual, an HUF, a partnership firm and BOI, including AOI.
The writer is with M Sheth & Co, a chartered accountancy firm in Mumbai. He can be reached at email@example.com