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Reverse charge mechanism

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To give Insights of Service Tax under Reverse Charge Mechanism

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Reverse charge mechanism

  1. 1. CA Pratik Mehta APMH & ASSOCIATE LLP Chartered Accountants
  2. 2. 2  Brief History of Reverse Charge  RCM introduced w.e.f 01.01.2005 via notification no 36/2004.  The Reverse Charge was introduced in Service Tax vide Budget of the year 2005-2006. At that point of time there was only few services which was covered under Reverse Charge. However, with the passage of time this list has been expanded and at present this list contains 11 services into it which covers both full Reverse Charge and Partial Reverse Charge.
  3. 3. 3  (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section [66B] in such manner and within such period as may be prescribed.  (2) Notwithstanding anything contained in sub-section (1), in respect of [such taxable services as may be notified] by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section [66B] and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.  [Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.]  Notification No. 30/2012-ST, dated 20th June, 2012 w.e.f 01.07.2012
  4. 4. Service Provider •Insurance Agent Service Receiver •Any person carrying on Insurance business 4 Sr. No. Description of a service (Insurance Auxiliary Service) w.e.f 01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 1. In respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business NIL 100%
  5. 5. 5 Service Provider •Recovery Agent Service Receiver • Banking company or a financial institution or a non-banking financial company Sr. No. Description of a service (Recovery Agent services ) w.e.f 11.07.2014 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 1A. In respect of services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non- banking financial company NIL 100%
  6. 6. 6 Sr. No. Description of a service (Selling or marketing agent services) w.e.f 01.04.2016 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 1C. In respect of services provided or agreed to be provided by a selling or marketing agent of lottery tickets in relation to lottery in any manner to a lottery distributor or selling agent of the State Government under the provisions of the Lottery (Regulations) Act, 1998 (17 of 1998) NIL 100%
  7. 7. 7 Service Provider •Selling or marketing agent of lottery tickets Service Receiver •Lottery distributor or selling agent of the State Government
  8. 8. 8 Service Provider •Goods Transport Agency Service Receiver • Factory • Society (Inc. Co-Op Hsg) • Registered Dealer of Excisable Goods • Body Corporate • Partnership Firm • AOP Sr. No. Description of a service (GTA Services) w.e.f 01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 2. In respect of services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road. NIL 100%
  9. 9. 9 Sr. No. Description of a service (Sponsorship Services) w.e.f 01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 3. In respect of services provided or agreed to be provided by way of sponsorship. NIL 100% Service Provider • Any Person Service Receiver •Any body corporate or partnership firm located in the taxable territory
  10. 10. 10 Service Provider • Arbitral Tribunal Service Receiver • Business Entity located in TT with turnover exceeding Rs. 10 lakhs in PY Sr. No. Description of a service (Arbitral tribunal Services) w.e.f 01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 4. In respect of services provided or agreed to be provided by an arbitral tribunal. NIL 100%
  11. 11. 11 Sr. No. Description of a service (Legal Services) w.e.f 01.04.2016 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 5. In respect of services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly NIL 100% Service Provider • Individual • Firm other than representational services by senior advocates Service Receiver •Business Entity having turnover exceeding Rs.10 Lakhs located in taxable territory in P.Y
  12. 12. 12 Sr. No. Description of a service (Director services) w.e.f. 07.08.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 5A. In respect of services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate NIL 100% Service Provider • Director Service Receiver • Company • Body Corporate
  13. 13. 13 Sr. No. Description of a service (Government services) w.e.f 01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 6. In respect of services provided or agreed to be provided by Government or local authority excluding,- (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 NIL 100% Service Provider • Government • Local Authority Service Receiver •Business Entity located in TT with turnover exceeding Rs. 10 lakhs in PY
  14. 14. 14 Sr. No. Description of a service (Renting of a motor vehicle) w.e.f 01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 7. (a)in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business. (b) in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business Nil 50% 100 % 50%
  15. 15. 15 Service Provider • Individual • HUF • Proprietary Firm • Partnership Firm • AOP Service Receiver • Business Entity registered as body corporate located in the taxable territory
  16. 16. 16 Sr. No. Description of a service (Supply of manpower & Security Services) w.e.f .01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 8. In respect of services provided or agreed to be provided by way of supply of manpower or security service for any purpose or security services Nill 100 % Service Provider • Individual • HUF • Proprietary Firm • Partnership Firm • AOP Service Receiver • Business Entity registered as body corporate located in the taxable territory
  17. 17. 17 Sr. No. Description of a service (Works Contract Services) w.e.f .01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 9. In respect of services provided or agreed to be provided by way of works contract 50% 50% Service Provider • Individual • HUF • Proprietary Firm • Partnership Firm • AOP Service Receiver • Business Entity registered as body corporate located in the taxable territory
  18. 18. 18 Sr. No. Description of a service (Import of Services) w.e.f .01.07.2012 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 10. In respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory Nill 100% Service Provider • Any Person Service Receiver • Any person
  19. 19. 19 Sr. No. Description of a service (Aggregators Services) w.e.f .01.03.2015 Percentage of service Percentage of service tax payable by any person liable for paying service tax other than the service provider 11. In respect of any service provided or agreed to be provided by a person involving an aggregator in any manner Nill 100% Service Provider • Any Person Service Receiver • Any Person
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