India’s tax authorities have expanded the scope of situations where companies doing business in India need to pay service tax under the reverse charge mechanism.

1. Indian Tax Authorities Update Reverse Charge Mechanism, Widen Service Tax Net
(Sunnyvale, CA)- India’s tax authorities have expanded the scope of situations where companies doing
business in India need to pay service tax under the reverse charge mechanism. In a recent notification,
India’s tax authorities noted that service tax is payable in India under the reverse charge mechanism:
 if a business entity receives services from its director(s),
 if a business entity receives legal services from an individual advocate or from a partnership firm of
advocates,
 if an Indian business entity receives services from an arbitral tribunal,
 if an Indian business entity receives certain specified services from the government or a local
authority, and
 if services are received by a business entity registered as a “body corporate” from an individual,
Hindu Undivided Family (HUF), a partnership firm, or Association of Persons (AOP) for:
 renting of motor vehicle designed to carry passengers;
 supply of manpower;
 works contract services.
In the June 2012 notification, tax authorities have excluded from the reverse charge mechanism
 certain telecommunication services,
 general insurance auxiliary services, and
 mutual fund distributor services.
The above were part of the original notification issued in 2004.
India Reverse Charge Mechanism Update: The Implications
 All companies or entities doing business in India that receive any of the above services and fall
under certain specified category of service receiver, must register for service tax.
 Once registered, it is mandatory for the registered tax payers to file service tax returns. As per
India’s Service Tax Act, “Nil” return is also mandatory and every registered person must file returns
from time to time. Know more on sas 70 compliance.
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