Chart of Service Tax payable under Reverse Charge Mechanism by a Corporate Entity

In this Article Author has discussed Reverse Charge Mechanisam on Services of an insurance agent to any person carrying on insurance business,  Services  of goods transport agency in respect of transportation  of goods by road, Services  by way of sponsorship , Services  of an arbitral tribunal Services of advocates (individual/firm), Services of directors of a company, Support services by Government or local authority, Import of Service, Renting of a  motor vehicle designed to carry passengers on abated value / non abated value, Supply of manpower for any purpose or security services &  Works contract.

Sl. No.
Description of
a service
Explanation
Effective
service
tax
rate
applicable
to
recipient
Effective service tax rate to be charged by provider
Service recipient’s liability
Service provider’s liability
Effective date

1

Services of an insurance agent to any person carrying on insurance businessCovered: Payment to insurance agents by insurance companies for their services.

12.360%

100%

01/07/2012, This was in effect even before finance act 2012.

2

Services  of goods transport agency in respect of transportation  of goods by roadCovered:Transportation of goods by road through a GTA which issues a consignment note, by whatever name called.Excluded: Courier, express cargo, Carriage of certain food/drink items, consignment upto Rs. 750/-.

3.090%

100%

01-Jul-12, This was in effect even before finance act 2012.

3

Services  by way of sponsorshipCovered: All sponsorships.Excluded: Advertisement/business promotion, certain sports related sponsorships.

12.360%

100%

01-Jul-12, This was in effect even before finance act 2012.

4

Services  of an arbitral tribunalCovered: Any payment for any service.

12.360%

100%

1-Jul-12

5

Services of advocates (individual/firm)Covered: Advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.

12.360%

100%

1-Jul-12

6

Services of directors of a companyCovered:Any payment to non-executive directors e.g. sitting fee, reimbursements.Excluded: Executive/directors in employment. If the  Company itself arranges lodging, fooding, travelling etc. for the non-executive directors and the bill is raised in the name of the Company. However, it may be covered under any other category e.g. car hire charges.

12.360%

100%

7-Aug-12

7

Support services by Government or local authorityCovered:Services of police, fire, ambulance etc.Excluded: Renting of immovable property, services of Department of Posts 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, solid waste management.

12.360%

100%

1-Jul-12

8

Import of ServiceCovered: Any payment for import of taxable services from any place outside India.

12.360%

100%

01-Jul-12, This was in effect even before finance act 2012.

9(a)

Renting of a  motor vehicle designed to carry passengers on abated valueIf service provider is not availing input credit, 9(a) is applicable otherwise 9(b) is applicable. If service provider does not charge service tax in invoice andhe is not registered under service tax i.e. ST No. not quoted in invoice, it can be assumed that it is not availing input credit.Covered:Hiring passenger cars, cabs, buses etc.Excluded: Radio taxi, metered cab, three wheeler, auto rickshaw, stage carrier, contract carriage and packaged tour, public transport not predominantly for tourism purpose e.g. Meru cabs, bus having contract permit hired for transportation of employees.

4.944%

100%

1-Jul-12

9(b)

Renting of a  motor vehicle designed to carry passengers on non abated value

4.944%

7.416%

40%

60%

1-Jul-12

10

Supply of manpower for any purpose or security servicesCovered: 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, payment for services of staff (not on payroll of the recipient of service) supplied by an agent/person under an arrangement where it is placed operationally under the superintendence or control of the recipient of service (e.g. housekeeping staff supplied by manpower agency), all security/detective services.Excluded: Joint employment, outsourcing the activity/service itself e.g. outsourcing house-keeping work to an outside agency instead of getting the manpower supplied by an agent for house-keeping work.

9.270%

3.090%

75%

25%

Manpower: 01-Jul-12, security services: 7-Aug-12

11(a)

Works contractCovered: Any contract involving the use of labour plus material on which VAT is leviable under any schedule of VAT Act on the material used in execution of works contract and such contract is for any new construction;  any addition and alteration to abandoned or damaged structures on land that are required to make them workable; any erection, commissioning or installation of plant, machinery or equipment or structures, whether per-fabricated or otherwise.

2.472%

2.472%

50%

50%

1-Jul-12

11(b)

Works contractCovered: Any contract involving the use of labour plus material on which VAT is leviable under any schedule of VAT Act on the material used in execution of works contract  and such contract is for maintenance or repair or reconditioning or restoration or servicing of any goods e.g. AMC of movable items.

4.326%

4.326%

50%

50%

1-Jul-12

11(c)

Works contractCovered: Any contract involving the use of labour plus material on which VAT is leviable under any schedule of VAT Act on the material used in execution of works contract and such contract is other than as mentioned under 11(a) & 11(b) or is for maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property e.g. Interior decoration, electrical work of items other than movable ones.

3.708%

3.708%

50%

50%

1-Jul-12

Note-

1. Point of taxation under reverse charge mechanism is date of payment to the service provider provided payment must happen within 6 months from the date of invoice otherewise point of taxation will be date of invoice. Invoice needs to be issued by the service provider within 30 days of completion of each event/service. If invoice is not issued within the specified time, point of taxation will be the date of completion of provision of service. Provided further that in case of “associated enterprises”, where the person providing the service is located outside India, the point of taxation shall be the date of debit in the books of account of the person receiving the service or date of making the payment whichever is earlier. For any service whose point of taxation has been determined and whole liability affixed before 1.7.2012 the new provisions will not apply. Merely because payments are being made after 1.7.2012 will not add any additional liability on the service receiver in respect of such services.

2. In the following cases, 100% service tax liability rests with the service provider only if service provider is a corporate entity:-

i. Renting of Motor vehicle

ii. Manpower services & Security Agency

iii. Works Contract

3. Service tax under reverse charge is applicable irrespective of the fact whether service provider is liable to service tax or not.

4. It is the responsibility of service recipient to determine whether particular works contract is leviable to VAT or not. Service recipient is liable under reverse charge mechanism even if service provider does not charge VAT in invoice if VAT is otherwise applicable.

5. Provisions relating to works contract are applicable even if material is purchased from a separate person other than the person rendering services or under separate agreement or under separate invoice.

6. Valuation = Gross amount charged in invoice by service provider (excluding taxes) plus fair market value of goods supplied by the service recipient used in execution of works contract (excluding taxes) less amount charged by service recipient from service provider in respect of goods supplied in relation to works contract.

CA Abhishek Gupta Contact No. 9892510074

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