Payment of Service Tax under reverse charge mechanism.
Normally, service tax is payable by the person who is providing the taxable service. However, the Central Government is empowered under Section 68(2) to notify the specified persons who are liable to pay service tax in respect of notified taxable services.
In this budget a proviso has been inserted wherein the Central Government can notify the specified services and the extent of service tax which shall be payable such person and the remaining part of the service tax shall be paid by the service provider. In other words, by insertion this proviso both the service recipient and the service provider together is required to pay the service tax.
The Government has issued Notification No.15/2012-Service Tax dated 17.03.2012, under section 68(2) by notifying the following taxable services and the extent of service tax payable thereon by the person liable to pay service tax:
a. Notified Taxable Service:
ü In case of Insurance agent, the Insurance Company;
ü In case of GTA, the consignor or consignee or his agent who effects the payment;
ü In case of sponsorship services, the body corporate or partnership firm located in the taxable territory (i.e.,India)
ü Service provided by Arbitral Tribunal or an Individual advocate or the support service provided or agreed to be provided by Government or local authority, to any business entity, then business entity is required to pay the service tax;
ü Services provided by Individual, HUF, Firm, AOP in respect of:
i. Renting or hiring of motor vehicle designed to carry passenger; or
ii. Supply of manpower; or
iii. Works contract
Then the Company or body corporate is required to pay service tax.
ü In case of import of taxable service, the recipient is required to pay service tax.
b. Extent of service tax payable by the recipient and by the service provider is as follows:
|
Sl. No |
Description of service |
% of service tax payable by the service provider |
% of service tax payable by the recipient |
|
1 |
Insurance agent |
Nil |
100% |
|
2 |
GTA |
Nil |
100% |
|
3 |
Sponsorship |
Nil |
100% |
|
4 |
Arbitral Tribunal |
Nil |
100% |
|
5 |
Individual Advocate |
Nil |
100% |
|
6 |
Support service by Government or local authority |
Nil |
100% |
|
7 |
Renting or hiring of motor vehicle to carry passenger on abated value |
Nil |
100% |
|
8 |
Renting or hiring of motor vehicle to carry passenger on non abated value |
60% |
40% |
|
9 |
Supply of manpower |
25% |
75% |
|
10 |
Works contract |
50% |
50% |
|
11 |
Import of taxable service |
Nil |
100% |
c. Date of Applicability – The Government has vide NOTIFICATION NO. 19/2012-SERVICE TAX, DATED 5-6-2012 specified that above provision will come into effect from 1st day of July, 2012.
Under works contract if I avail 40% or 60% or 70% abatement and calculate the the duty @12.36% I can pass on 50% of duty liability to service receiver.
or it is compulsory to pay duty on 100% value and then pass on 50% of duty liability to service receiver.
Kindly advice.
Thanks and regards.
M.P.Achari
How Service Receiver will pay tax if he is not registered with Service Tax?
sir
kindly clarify wheather pvt.ltd company is ennged in manpwer service .service tax reversed charged is applicable for them. i.e 75% service tax deposit by receiptent or 25% service tax deposit by man power co (those are pvt.ltd)
Whether the new reverse charge mechanism id applicable for pvt. ltd companies who are providing annual maintenance service of any equipment to any government organizations/PSU?
please clarify wheather payment code is same as 00441089 for all services.
SR eligible for benefit of Rs. 10Lacs exemption
This will create maximum pain. Even if service receiver is below 10 Lacs or small entity covered incidentally in reverse charge, it needs to get registered under service tax and shall be liable to pay taxes under reverse charge as service receiver. Cenvat cannot be utilised against this payment so it shall be an explicit cash outflow. Further once the tax is paid under reverse charge the same can be utilised as Cenvat subject to Cenvat credit rules.
We are a Pvt Ltd Company receiving service of Manpower supply. Can we get benefit of exemption upto turnover of services up to Rs. 10 lacs from payment of service tax on this manpower supply services as recipient?