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Reverse Charge Mechanism - A Nightmare to service receivers?


RCM - A nightmare to service receivers

The purpose of expanding RCM is to collect tax without any escape as felt in the past. In other words Government has started a policy to catch hold of law abiders when there are offenders or ignorant. Though set off is available for RCM payment, understanding the ambiguous provisions and finding a new system of accounting to meet the changes is a nightmare. As rightly observed in the article Manpower supply definition has been changed drastically with a wording ‘to work under his superintendent or control’. The old concept of payment term will define man power supply is gone and hence one has to be very careful in identifying RCM on man power supply. Further no bifurcation of Whole time Director and Part time Director creates ambiguity. Also it is strange that Notification itself allows for having different valuation by service provider and service receiver in respect of works contract. How a transaction can have two independent methods of valuation is not understandable. This will make field officers to go to service receiver’s end also in the pretext of know-how of valuation.

Posted by
G.Mani

govindan_mani govindan_mani 10/08/2012

 
Re :RCM - A nightmare to service receivers

The very purpose behind the newly invented joint liability under RCM is to avoid tax evasion after it being collected from the service recipient.But there is no logic behind collecting tax from service recipient in cases where the service provider itslef is under threshold limit of Rs 10 lacs. Further, such RCM payments towards Rent a Cab, Construction works contract etc are not Cenvatable. The noble concept of cascading effect of taxes gets reverse effect through the new reverse charge

james pg 10/08/2012

 

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