The document summarizes key aspects of reverse charge provisions and abatements under service tax in India per recent notifications. It discusses services where the liability to pay tax shifts fully or partially to the service recipient under reverse charge. It also outlines various taxable services and the abatement percentage allowed, such as 40% for transport of passengers by air and 70% for supply of food. Conditions for availing abatements include not claiming CENVAT credit on inputs by the service provider.

1. Presents
A Knowledge Master Class
On
“Understanding New Regime of Service Taxation in India”
Conducted by
Dr. Sanjiv Agarwal
FCA, FCS
Wednesday,
31th
October,2012
New Delhi © Dr. Sanjiv Agarwal
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2. SESSION – IV
Services under Reverse Charge [N. No.
30/2012-ST]
and
Abatements in Service Tax
[N. No. 26/2012-ST]
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3. This Presentation Covers –
• Reverse Charge Provisions
• Conditions for Reverse Charge
• Abatements
• Conditions for Abatements
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4.  Authority for reverse charge u/s 68(2) of Finance Act, 2012
 Person liable to pay tax – Rule 2(1)(d) of Service Tax
Rules, 1994
 W.e.f. 1.7.2012, a new scheme of taxation is applicable
whereby the liability of payment of service tax shall be both
on the service provider and the service recipient
(Notification No. 30/2012-ST, dated 20.6.2012 )
 The extent to which tax liability has to be discharged by the
service receiver specified in the notification.

5.  Creditof tax paid can be availed by service
recipient if it is input service
 The credit of tax paid by the service recipient
under partial reverse charge would be
available on the basis on the tax payment
challan
 Service provider under RCM may claim
refund of tax paid under rule 5(b) of
CCR, 2004

6. Under Partial Reverse Charge (Proportional)
 Renting of motor vehicles
 Manpower supply & security services
 Works contracts
Under full reverse charge (100%)
• insurance business services by agents
• goods transportation by road
• sponsorship
• arbitral tribunals
• legal services
• company director's services
• services provided by Government / local authority excluding specified services
• services provided by persons located in non-taxable territory to persons located in
taxable territory.

7.  Governed by Notification No. 30/2012-ST dated
20.06.2012 w.e.f. 1.7.2012
 Liabilities of both the service provider and service
receiver are independent of each other
 Reverse charge will not apply where the service
receiver is located in non-taxable territory
 For three specified services provided by business
entities being company, society, cooperative society,
trust etc, reverse charge will not apply.
 Reverse charge will also not apply where the service
recipient is any person or business entity not being a
body corporate in case of three specified services
 Small scale benefit is available only to service provider
(not to service receiver), if entitled

8.  Service receiver under reverse charge cannot avail
exemption of Rs. 10 lakh under Notification No.
33/2012-ST dated 20.06.2012
 Valuation of services by services provider and service
receiver can be on different principles, if permitted by
law (e.g. works contract - Refer Notification No.
30/2012-ST, explanation II)
 Liability to pay Service Tax for ongoing contracts will
be as per Point of Taxation Rules, 2011
 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

9.  In case of proportional reverse charge (manpower
supply & security, works contract and motor vehicle
hire to carry passengers), service provider should
charge Service Tax only on his portion of Service Tax
in the invoice and mention that Service Tax on balance
amount is payable by service receiver.
 It is the statutory obligation on the service recipient to
pay Service Tax, whether under full or proportional
reverse charge
 Service Tax under reverse charge has to be paid by
cash vide GAR Challan No. 7 and it cannot be paid by
way of utilization of Cenvat Credit.

10.  In case of renting of motor vehicles to carry passengers where
abatement is also available, reverse charge basis is
proportional depending upon the abatement on the condition
that no Cenvat Credit has been availed. The service provider
should provide a certificate, either in the invoice itself or
separately.
 In case of renting of motor vehicle hire to carry passengers,
reverse charge applies only where the motor vehicle is
provided with driver and service receiver is not engaged in
same business.
 In case of director's services, the service provider should not
be employed (whole time) director. Employees are not
covered under the scope of Service Tax.

11.  In respect of manpower supply and security services, works contract
services and renting of motor vehicles to carry passenger, reverse charge
shall be applicable only when following two conditions are satisfied –
• service receiver is a business entity registered as a body corporate, and
• service provider is any one of the following entities –
 Individual
 Hindu undivided family (HUF)
 Firm (including limited liability partnerships)
 Association of persons
If both the above conditions are not satisfied in respect of these three
services, Service Tax shall be payable by the service provider in ordinary
course.
 Security services means services relating to the security of any property,
whether movable or immovable, or of any person, in any manner and
includes the services of investigation, detection or verification, of any fact or
activity

12. Service Provider Service Receiver
Individual Advocate / Firm / LLP Business entity with turnover > Rs 10
lakhs in preceding financial year
Arbitral Tribunal Business entity with turnover > Rs 10
lakh in previous financial year

13. Sr. No Description of Service Service Service receiver
provider
1. Services provided by an Nil 100%
insurance agent to any person
carrying on insurance business
2. Services provided by a goods Nil 100%
transport agency in respect
of transportation of goods by
road
3. Services provided by way of Nil 100%
sponsorship

14. Sr.No Description of Service Service Service receiver
provider
4. Services provided by an arbitral Nil 100%
tribunal
5. Services provided by individual Nil 100%
advocate or a firm of advocates by way
of legal services
5A. in respect of services provided or Nil 100%
agreed to be provided by a director of a
company to the said company ( w.e.f
7.08.2012)
6. Services provided by Government or Nil 100%
local authority by way of support
services excluding,-
(1) renting of immovable property,
(2) postal services
(3) transport of goods / passengers
(4) air craft or vessel

15. Sr.N Description of Service Service Service
o provider receiver
7. Hiring of Motor Vehicle Nil 100 %
(a) renting of a motor vehicle
designed to carry passengers on
abated value to any person not
engaged in the similar line of
business 60% 40%
(b) 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
8. Services provided by way of 25% 75 %
supply of manpower for any
purpose or security services (
w.e.f 07.08.2012)

16. Sr.No Description of Service Service Service receiver
provider
9. Services provided in service
portion in execution of works 50% 50%
contract
10. Services provided by any person
who is located in a non-taxable Nil 100%
territory and received by any
person located in the taxable
territory

17. 17

18. • Besides full exemption to 39 categories of services vide
Notification No. 25/2012-ST dated 20.06.2012
• Earlier there were a number of exemption notifications that
prescribed the abatements for various categories of services
(including 1/2006)
• Abatements merged into a single Notification No 26/2102 -
ST dated 20/6/12
• Valuation rules contain abatement for Works Contract and
Supply of Food Services

19. Sl. No. Description of taxable service Taxable Conditions
value(%)
1 Financial leasing services including 10 Nil
equipment leasing and hire purchase
2 Transport of goods by rail (exempted upto 30 Nil
30.9.2012)
3 Transport of passengers, with or without 30 Nil
accompanied belongings by rail ( exempted
upto 30.9.2012)
4 Supply of food or any other article of 70 CENVAT credit on any
human consumption or any drink, in a goods classifiable under
premises, including hotel, convention chapter 1 to 22 of the
center, club, pandal, shamiana or any place Central Excise Tariff Act,
specially arranged for organizing a function 1985 has not been taken
under the provisions of the
CENVAT Credit Rules, 2004.

20. Sl. Description of taxable service Taxable Conditions
No value(%)
5 Transport of passengers by air, with 40 CENVAT credit on inputs or capital goods,
or without accompanied belongings used for providing the taxable service, has
not been taken under the provisions of the
CENVAT Credit Rules, 2004.
6 Renting of hotels, inns, guest 60 Same as above.
houses, clubs, campsites or other
commercial places meant for
residential or lodging purposes
7 Transport of goods by road by 25 CENVAT credit on inputs, capital goods
Goods Transport Agency and input services, used for providing the
taxable service, has not been taken under
the provisions of the CENVAT Credit
Rules, 2004.
8 Services provided in relation to chit 70 Same as above.

21. Sl. Description of taxable service Taxable Conditions
No value(%)
9 Renting of any motor vehicle 40 Same as above.
designed to carry passengers
10 Transport of goods in a vessel from 50 Same as above.
one port to another
11 Tour operator services 25 (i) CENVAT credit on inputs, capital
(i) provided by a tour operator in relation goods and input services, used for
to a package tour providing the taxable service, has not
been taken under the provisions of the
CENVAT Credit Rules, 2004.
(ii) The bill issued for this purpose
indicates that it is inclusive of charges
for such a tour.

22. Sl. No Description of taxable Taxable Conditions
service value(%)
(ii) provided by a tour operator in 10 (i) CENVAT credit on inputs, capital goods
relation to a tour, solely arranging and input services, used for providing the
or booking accommodation taxable service, has not been taken under
the provisions of the CENVAT Credit Rules,
2004.
(ii) The invoice, bill or challan issued
indicates that it is towards the charges for
such accommodation.
(iii) This exemption shall not apply in such
cases where the invoice, bill or challan
issued by the tour operator, in relation to a
tour, only includes the service charges for
arranging or booking accommodation for
any person and does not include the cost
of such accommodation.

23. Sl. No Description of taxable service Taxable Conditions
value(%)
(iii) Services, other than 40 (i) CENVAT credit on inputs, capital
services specified above in (i) goods and input services, used for
or (ii) providing the taxable service, has not
been taken under the provisions of the
CENVAT Credit Rules, 2004.
(ii) The bill issued indicates that the
amount charged in the bill is the gross
amount charged for such a tour.

24. Sl. No Description of taxable service Taxable Conditions
value(%)
12. Construction of a complex, 25 (i) CENVAT credit on inputs used
building, civil structure or a for providing the taxable service
part thereof, intended for a has not been taken under the
sale to a buyer, wholly or provisions of the CENVAT Credit
partly except where entire Rules, 2004.
consideration is received after
issuance of completion (ii) The value of land is included
certificate by the competent in the amount charged from the
authority service recipient.

25. Draft Circular F. No.354 /146/2012 – TRU dated 27.09.2012
(Air Travel)
Charges which are directly related to journey such as re-confirmation
fee, date change fee, seat upgrade fee, preferred seat charges etc. will
be covered by abatement
Charges which are not related to journey such as meal charges, escort
charges etc. will not be covered by abatement.
Excess baggage charge may be leviable to service tax without
abatement
Pet charges may be leviable to service tax without abatement
For cancellation charges billed separately as administrative charge,
abatement will not be applicable
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26. THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com