• Sep
  • 06
  • 2012

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

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 business Covered: 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 road Covered: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 sponsorship Covered: 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 tribunal Covered: 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 company Covered: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 authority Covered: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 Service Covered: 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 value If 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 services 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, 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 contract Covered: 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 contract Covered: 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 contract Covered: 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

Sandeep Kanoi

13 Responses to “Chart of Service Tax payable under Reverse Charge Mechanism by a Corporate Entity”

  1. Manoj Singh says:

    Is service tax payable by Company on its property (i.e.,Building) let-out to Directors on concessional rent

  2. Devanshu Patel says:

    Will any reparing charges of machine from party which is under threeshold limit not levy any vat or cst. will covered under RCM?

  3. chandan says:

    Pl clarify in case of expenses booked as provision for 31st march applicability of service tax for items which are falling under reverse charge mechanisam

  4. Ravindra Mehendale says:

    Please help. Myself is an Insurance Agent & The Insurance co deducts 7.36% from my commission towards Service tax under reverse charge mechanism.

    Please advice A. Accounting entries passed by the company for the recovery made
    B. Do I have to pay balance Service tax ( 12.36 less 7.36 )
    C. I do not have Service tax registration
    D. When I need to file service tax return
    E. Possible input credits I can claim
    F. Refund claimable as the commission do not cross Rs. 4 lacs.

    Thanks & Regards
    Ravindra Mehendale

  5. Alex says:

    A manpower recruitment agency provide a manpower recruitment services to a abc co. pvt ltd. whether reverse charege applicable on this services or not ?

  6. Jawahar Singh says:

    Please confirm contract of House Keeping Service for spcific job, is not a part of supply of Manpower, and service tax on House Keeping Service is not payable under reverse charge mechanism scheme as per Notification No. 30/2012-Service Tax dated 20th June 2012, point no. 8 of terms manpower is supply for any perpose.

  7. Anil says:

    What you told about Works Contract appears to be wrong.

    If material is purchased from X and work is carried out by Y – both used by Z (Ltd Co) then Works Contract Reverse Charge is not applicable.

  8. Suneel Sonawane says:

    Really handy & simplified information. Would like to know whether can avail INPUT SERVICE TAX CREDIT for all above 10 services paid under reverse charge? As this is chart for REVERSE CHARGE, please provide CHART for eligible Input Service tax credit chart for manufacturer.

  9. Inder Kumar Kamra says:

    Article on reverse mechanism is very good, useful and handy. Chart does not cover determination of value of service of works contract service under Rule 2A (i) of Valuation Rules i.e. Value of Service = Gross Amount – Value of Material-VAT

  10. lalit says:

    if body corporate giving the following dervices
    man power supply
    security services
    works contract to individual or other body corporate then latest amended reverse machanism of 25/75 is applicable

  11. lalit says:

    whether service category wise service tax registration is need to be amended the certificate.
    such as a logistic co has register for C&F services but also supply man power through man power supply agency then would it require to get this category be amended to certificate.

  12. Dilip Shah says:

    Very good article. If recipent of services prescribed is no an entity availing services exceeding whether exemption would be available up the point of its’ crossing Rs.10 Lacs theshhold limit?

  13. Divyen Patel says:

    In Supply of manpower for any purpose or security services type of service, exclusion is given which is not mentioned in notification. Can the same be verified or confirmed or will leas to litigation

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