CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BA...
Upcoming SlideShare
Loading in …5
×

Service tax reverse charge mechanism

324 views

Published on

Service tax reverse charge mechanism

Published in: Law
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
324
On SlideShare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
30
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Service tax reverse charge mechanism

  1. 1. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Reverse Charge Mechanism. Under Service Tax By Valli
  2. 2. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Reverse Charge Mechanism Under Service Tax -Introduction • Service tax is the tax levied by the government on taxable services. Service Tax is guided by the provisions of Chapter V of the Finance Act, 1994 and the service tax rules, 1994. Thus the finance act, amendments to the finance acts provided in every annual budget and the corresponding service tax rules define the scope, extent and other conditions of levy of service tax under Service tax Reverse charge mechanism. • As per section 68(1) of the Finance Act, 1994, every person providing taxable services to any other person shall pay service tax at rate specified in section 66.The liability to pay service tax lies with the service provider. He shall collect the service tax from the service recipients and thus pay it to the account of government.
  3. 3. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Contn.. • But along with this, section 68(2) states that, central government may specify any other person who shall be liable to pay service tax and thus all provisions of service tax shall apply normally. This means any person other than service provider, i.e., the service recipient shall be made liable to pay the service tax. This mechanism of shifting the service tax liability from service provider to the service recipient is known as service tax reverse charge mechanism. • The concept of reverse charge mechanism under service tax was introduced with 1997 by inserting a new subsection 68(1A) with notification no. 30/2012- ST
  4. 4. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Registration under Service Tax  Every person who is liable to pay service tax shall take registration under service tax as per section 69 of Finance Act, 1994  Service recipient shall obtain registration under service tax as recipient of service, pay service tax and file return  Assessees who have to take registration :  Service provider who has provided a taxable services of value exceeding Rs. 9 lakhs in the preceding financial year  Service receiver liable to pay service tax under reverse charge mechanism u/s 68(2) / rule 2(1)(d)  Input service distributor  Importer of service being person liable u/s 68(2)
  5. 5. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Applicability of Reverse Charge Mechanism In Service Tax ( RCM): • Only on receiving specific services , reverse charge mechanism is applicable. service receiver are liable to pay service tax under reverse charge. This is not applicable for all the service receiver. • Service receiver is not paying extra service tax due to reverse charge mechanism. The amount of service tax payment is remained the same but liability to pay tax to government is apportioned between service receiver and service provider. WHEN TO PAY TAX UNDER REVERSE CHARGE? • Service receiver has to pay tax on reverse charge only on making payment to service provider. The condition is that service receiver should pay within 6 months from issuance of invoice.
  6. 6. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Services under Reverse Charge Mechanism 1)      Import of services: In case the service provider is located outside India and any person is importing his services, i.e., service recipient shall be liable to pay service tax for such services. 2)      Services of insurance agent: Where an insurance agent is providing his services to a person/company carrying on insurance business, i.e., services of insurance agent to the insurance company, service recipient (insurance company) shall be liable to pay service tax. 100% liability lies with the insurance company and the normal rate shall apply.
  7. 7. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Contn…  3) Services of goods transport agency (GTA): GTA are a major component of reverse charge mechanism. GTA provide the service of transportation of goods by road by issuing a consignment note. Person paying the freight shall be the service recipient who shall be liable to pay service tax on such service. 4)      Services of sponsorship: Under the service tax reverse charge mechanism, providing sponsorship is also considered a service which is covered under reverse charge mechanism. This means, the person receiving the sponsorship shall pay the service tax on the same.
  8. 8. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Contn.. 5)      Services of a tribunal: Tribunal or the arbitral tribunal is the panel of persons who solve disputes by way of arbitration (settlement). This is one of the services considered under service tax reverse charge mechanism. Thus the person receiving the services of tribunal, i.e., whose conflict is getting resolved will be the service recipient and will be liable to pay service tax. 6)      Services of advocates: Services of advice or consultancy related to any law or representation before court or any other authority from the advocates are also included under reverse charge mechanism. The person receiving such services shall pay service tax.
  9. 9. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Contn.. 7)      Services of manpower supply: Providing manpower by any agent for any business entity where manpower work with the business entity while being on the roll of agent company is also a service which is covered under reverse charge mechanism. Business entity receiving manpower is the service recipient liable to pay tax. 75% liability of service tax lies with service recipient while 25% lies with service provider. 8)      Services of renting motor vehicle: Hired cabs, cars and buses are included under this service. But it doesn’t include metered cab, public transport etc. There can be two cases in view of this service- Service provider availing input credit- liability of service recipient is 40% while that of service provider is 60%. Service provider not availing input credit-100% liability lies with service recipient.
  10. 10. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Contn.. 9) Services of directors of company: After introduction of negative listing approach, services of directors have also been made taxable and covered under reverse charge mechanism applicable from 07.08.2012. So, any payments made to non executive directors such as sitting fees etc. are taxable. 100% liability lies with service recipient. 10) Support services by authority: Any life support services provided by government or local authority are also taxable with effect from 01.07.2012 and the full liability lies with service recipient. 11) Works contract: There can be three cases of works contract- Both, service provider and service recipient, have 50% liability each  For new construction, addition, erection or commissioning of plant & machinery  Maintenance or repair or reconditioning services  Works contract other than above two; for completion and
  11. 11. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Service Tax Reverse Charge Mechanism common provisions  The taxable event in case of reverse charge mechanism shall be the completion of provision of service. This means, the liability to pay service tax arises as soon as the services have been provided by the service provider under service tax reverse charge mechanism  Point of taxation shall be the date of payment to service provider. In case the payment is not made within 6 months of the issue of invoice, date of invoice shall be considered the point of taxation.  There is no minimum exemption limit in case or reverse charge mechanism. So, the service tax will be levied even if value of services provided of service provider doesn’t exceed Rs. 100000 and thus he is exempt from service tax.
  12. 12. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Cond..  The service recipient can claim the tax credit of service tax paid by him on input services. For this, he shall be required to produce tax payment challans as proof of payment.  Service provider shall be required to pay the tax to the government even if he doesn’t collect it from the service recipients. So the actual burden is irrelevant.
  13. 13. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Important Points in Reverse Charge Mechanism   Liabilities of both the service provider and service receiver are statutory and independent of each other   Liability cannot be shifted by mutual agreement  Reverse charge will not apply where the service receiver is located in non-taxable territory  Reverse charge shall not be applicable if provider of service was liable before 1.7.2012  Service Tax will not be payable by service receiver under reverse charge, if service was provided prior to 1.7.2012, even if payment is made after 30.06.2012
  14. 14. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Conclusion  ‘Support services’ provided by Government or Local Authority to Business Entity will continue to be taxed under Reverse charge mechanism except (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994.  Reverse Charge provisions are equally important in service tax regime which can’t be avoided.
  15. 15. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com

×