Confused About Service Tax on Outsourcing Bills: Should It Be on Total or Just Service Charge?

My vendor (Outsourcing agency) is charging us service tax on the complete value of the outsource bill, whereas the agreed component, which is a salary + statutory, amounts to Rs. 8000/-. In addition, there are 10% service charges paid to my vendor, totaling Rs. 8800/- paid to him on a monthly basis.

My question is: should the service tax be levied on Rs. 800/-, which is the service charge, or on the total Rs. 8800/-?

We are not able to get any clarification on the same. Can you please help us?

Sekhar

Service tax would be on the entire amount, i.e., 8800, not only on 800, as we are also using an outsourcing agency and paying the service tax on the entire amount. We checked with our legal person as well.

It will be taxable on the gross value, i.e., Rs. 8800/- in your case. This is effective from 16-06-2005.

Please post the relevant notification number for total outsourcing of services. For total outsourcing, I hope the reverse tax mechanism does not apply. Please do help me with the relevant notifications.

Service tax is chargeable on the gross bill. From June 15, the principal employer will have to deposit the full service tax, not the vendor.

Please do post the relevant notification number and the details. As of now, the outsourcing agency charges the end user full service tax and remits 100% to the government. Reverse tax was not applicable. Please post the changed scenario if any.