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Dear All,
I am working in a start up Manpower recruitment agency.
Invoice will be like this:
8.33% on Salary = 23070
Service Tax = 2851
Total net amount= 25921
Our client will deduct 10% on net amount i.e., 2592.1 on 25921. So we shall receive 23,328.
Client is paying the bill after candidate completing 6 months of service. But invoice will be raised on the Date of joining of the candidate.
Since our agency is a start up Proprietorship firm where the turnover is less than 10 Lakh. But still we have registered under service tax.
Please clarify on he below:
1) How much Service Tax should we pay to the Govt on the above invoice?
2) Since Client is paying after 6 months, so when should we raise the invoice? When should we pay the service tax, whether after receiving the payment or immediately after raising the invoice?
3)How can we claim TDS and when..will we come under Income Tax?
Kindly post your knowledge on the above. It would be grate favour to us.

From India, Bangalore

In your case as your service in related to man power there is something called as reverse charge mechanism. Under reverse charge mechanism you should charge the service tax of 25% on 12.36%, Rest of the amount the service receiver has to pay directly to the service tax department.

In reference to your queries

1) If at all you are receiving the Service Tax amount of rs. 2851/- then you should pay entire 2851/- to the service tax department immediately on generation of the invoice to the client.

2) Irrespective of whether you receive the amount or not you have to remit the same to the department. Frankly speaking you should raise the invoice as soon as completion of the manpower process. In this case you can request your client to pay atleast 50% of the invoice amount immediately on raising the invoice and balance after 6 months. Otherwise you can prepare one more contract stating after completion of the process you will raise only the proforma invoice and on completion of 6 months you will raise the invoice and receive the amount.

3) TDS amount deducted will remitted to the department directly. Once in 3 months they should issue the Form 16A to you. You have to prepare the income& expenditure on completion of each FY, Submit the returns

From India, Bangalore
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