3. PURPOSE
To Give Insights of Service tax
Under Reverse Charge
Machanism
3 ATM 16.03.2013
4. Basics on Reverse Charge
Mechanism
Normally, service tax is payable by person providing the service.
Section 68(2) makes provision for reverse charge i.e. making person
receiving the service liable to pay tax
Provisions relating to reverse charge are contained in Notification No.
30/2012-ST dated 20-6-2012.
Cenvat credit cannot be used to pay tax by service receiver. Service
tax as to be paid by cash only i.e. GAR-7 challan.
Once paid, Cenvat credit can be taken
A statutory liability cannot be shifted by mutual agreement. If statutory
liability is of service receiver, he alone is liable.
ATM 16.03.2013
5. Basics on Reverse Charge
Mechanism (Ctnd)
In some cases, reverse charge is applicable only when service
receiver is business entity registered as ‘Body Corporate’.
Business entity” means any person ordinarily carrying out any
activity relating to industry, commerce or any other business or
profession. Thus, Government, charitable organisation is not
‘business entity’.
Body Corporate – Company, LLP, Cooperative Society is
Body Corporate – Firm, HUF, Trust is not ‘Body Corporate’
[Society registered under Societies Act is legally not ‘body
corporate’].
ATM 16.03.2013
6. RCM Threshold
Exemption
Liability
of Service Provider and Service
Recipient is Independent of Each Other.
Even though service provider has claimed
small tax payer (Below Rs. 10L) exemption
Service receiver has to pay Service tax.
Threshold Exemption of Rs. 10L is not
available to SR. ATM 16.03.2013
7. Whether SR can pay ST by
utilizing CENVAT Credit?
NO
Explanation to Rule 3(4) of CCR provides that
“CENVAT Credit cannot be used for payment of
service tax in respect of services where the person
liable to pay tax is the service recipient.” Therefore,
SR has no option but to make payment of ST and
claim the same as Credit thereafter
ATM 16.03.2013
10. Insurance Agent to Insurance
Company
Services of an insurance agent to any person
carrying on insurance business w.e.f.
01/07/2012.This was in effect even before
finance act, 2012.
12.36%
ATM 16.03.2013
12. GOODS Transport Agency
goods transport agency in respect
of transportation of goods by road w.e.f.
01/07/2012. This was in effect even before
finance act, 2012.
75% Abatement
Effective Rate 3.09%
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13. GOODS Transport Agency
Applicable when Freight Payable By
Any factory registered under factories Act
Any society registered under society registration Act,
1860
Any co-operative Society
Any dealer of excisable goods who is registered
under Central Excise Act, 1941
Any Body Corporate
Any Partnership Firm including AOP
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14. GOODS Transport Agency
EXPLANATION I to Notification 30/2012
The Person Who Pays or is liable to pay
freight for transportation of goods, located
in taxable territory shall be treated as the
person who receives the service.
ATM 16.03.2013
16. Services by way of sponsorship
Services by way of sponsorship w.e.f.
01/07/2012. This was in effect even before
finance act, 2012.
Covered: All sponsorships.
Servicerecipient’s liability is 100%.
Rate 12.36%
ATM 16.03.2013
18. Services of an arbitral tribunal
Effective Date 01.07.2012
Covered: Any payment for any service.
Service recipient’s liability is 100%.
Effective Rate 12.36%
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19. Services of advocates
(individual/firm) w.e.f. 01/07/2012.
Covered: Advice, consultancy or assistance
in any branch of law, in any manner and
includes representational services before any
court, tribunal or authority. Service recipient’s
liability is 100%
Effective Rate : 12.36%
ATM 16.03.2013
21. Services of directors of a
company w.e.f. 07/08/2012.
Covered: Any payment to non-executive
directors for any service e.g. sitting fee,
reimbursements
Effective Rate : 12.36%
ATM 16.03.2013
23. Support services by Government or
Local Authority w.e.f. 01/07/2012
Covered: Services of police, fire, ambulance etc.
Excluded: Renting of immovable property, services of
Post Department by way of speed post, express parcel
post, life insurance and agency services, services in
relation to an aircraft or a vessel, transport of goods or
passengers, municipal, public convenience and other
public services like water supply, sanitation, and solid
wastemanagement.
Service recipient’s liability is 100%
Effective Rate : 12.36%.
ATM 16.03.2013
25. Import of service w.e.f. 01/07/2012..
This was in effect even before finance act,
2012
Covered: Any payment for import
of taxable services from any place outside
India.
Service recipient’s liability is 100%.
Effective Rate : 12.36%
ATM 16.03.2013
27. Renting of a Motor Vehicle
When SP is not availing input credit
Applicable to Hiring of Passenger Cars,
Cabs, Bus etc
Not Applicable to Radio Taxy, Metered cab,
Three Wheeler, contract carraige, public
transport not predominantly for tourism
purpose
Abatement 60%
Effective Rate: 4.944% (40%)
ATM 16.03.2013
28. Renting of a Motor Vehicle
When SP is availing input credit
Conditions Same as discussed
Service Recipient : 4.944% (40%)
Service Provider : 7.416% (60%)
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30. Supply of Manpower
WEF 01.07.2012
Security Services WEF 07.08.2012
Covered : Payment for services of the staff
seconded/deputed with the company under
an arrangement where the staff remains on
the payroll of the original employer only
Service Recipient : 9.270% (75%)
Service Provider : 3.090% (25%)16.03.2013
ATM
32. (a) Works Contract Service
WEF 01.07.2012
Any Contract in which Labour + Material is
used
For New Construction, any addition to
abandoned structures on Land
For Erection, commissioning or installation of
plant, machinery or equipment
Abatement : 60%
SR and SP both 2.472% Each ATM 16.03.2013
33. (b) Works contract w.e.f. 01/07/2012
Any Contract in which labour + Material used
For maintenance or repair or reconditioning
of any goods e.g AMC of Movable items/
office equipments
SP and SR both 50% Each
Abatement : 30%
Effective Rate: 4.326% Each
ATM 16.03.2013
34. (C)Works contract w.e.f. 01/07/2012
Any Contract in which use of labour and
material
for maintenance, repair, completion and
finishing services such as glazing, plastering,
floor and wall tiling, installation of electrical
fittings of an immovable property
SP and SR 50% Each
Abatement : 40%
Effective Rate: 3.708% by both
ATM 16.03.2013
36. SUM UP
Type of Service % Payable by SP % Payable by SR
Insurance Agent NIL 100%
GTA NIL 100%
Sponsorship NIL 100%
Arbitral Tribunal NIL 100%
(Advocate)
Support Service (GOV) NIL 100%
Hiring of MV (no NIL 100%
abatement)
Hiring of MV 60% 40%
(abatement)
ATM 16.03.2013
37. SUM UP (Contd)
Type of Service % Payable by SP % Payable by SR
Supply of Man Power 25% 75%
or Security Services
Works Contract 50% 50%
Import of Services NIL 100%
Services by Director of NIL 100%
the Company
ATM 16.03.2013
