CA Srikant Agarwal
We know that the rate of abatement and applicability of RCM (Reverse Charge Mechanism) play an important role while making payment of service tax to vendor and payment of service tax under RCM. In the article we have compiled all the provisions and notifications applicable for Abatement on service tax and Reverse charge mechanism. It would be beneficial for all those who are dealing with processing of vendor bills in relation to service tax and is liable to pay service tax under RCM.
The provisions relating to abatement is tabulated below:
In case abatement is applicable then the service tax is not payable on the whole amount of bill. Say for example in case of GTA (goods Transport Agency) the taxable rate is 25% (i.e 75% abatement is allowed). So in such a case if GTA bill is of Rs 1,00,000 then the applicable service tax would be 12.36% of (25% of 1,00,000) i.e Rs 3,090.
Abatement Rate chart under Service tax
S.N |
Service |
Taxable |
Effective rate as on date |
Condition for service provider |
1 |
Goods Transport Agency (GTA) (any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage)Provided that when such person is located in a non-taxable territory, the provider of such service shall be liable to pay service tax. |
25% |
3.090% |
No cenvat credit availed |
2 |
Transport of goods by rail |
30% |
3.708% |
Nil |
3 |
Transport of passengers by rail |
30% |
3.708% |
Nil |
4 |
Transport of goods in a vessel from one port in India to another |
50% |
6.180% |
No cenvat credit availed |
5 |
Transport of passengers by air |
40% |
4.944% |
Cenvat credit on inputs and CG is not availed |
6 |
Supply of food or any other article of human consumption or any drink, in a restaurant / other premises |
40% |
4.944% |
Cenvat credit of goods in Ch. 1 to 22 not taken.Further, Rule 6 reversal required |
7 |
Supply of food in convention centre, pandal, shamiana etc |
70% |
8.652% |
Cenvat credit of goods in Ch. 1 to 22 not taken.Further, Rule 6 reversal required |
8 |
Accommodation in hotels, inns etc |
60% |
7.416% |
Cenvat credit on inputs and CG is not availed |
9 |
Renting of any motor vehicle designed to carry passengers |
40% |
4.944% |
No cenvat credit availed |
10 |
Package tour |
25% |
3.090% |
No cenvat credit availed.Bill incl. of charges for tour |
11 |
Booking accommodation |
10% |
1.236% |
-No cenvat credit availed– Bill indicates so– NA if invoice only for service charges |
12 |
Services other than 11 and 12 provided in relation to tour |
40% |
4.944% |
-No cenvat credit availed– Invoice is for gross amount |
13 |
Financial leasing services including hire purchase |
10% |
1.236% |
Nil |
14 |
Services in relation to chit |
70% |
8.652% |
No cenvat credit availed |
15 |
Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, except where entire consideration is received after issuance of completion certificate by the competent authority,-(a) for a residential unit satisfying both the following conditions,namely:–(i) the carpet area of the unit is less than 2000 square feet; and(ii) the amount charged for the unit is less than rupees one crore;(b) for other than the (a) above |
a) 25%b) 30% |
a) 3.09%b) 3.708% |
(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004;(ii) The value of land is included in the amount charged from the service receiver. |
16 |
Works contracts entered into for execution of original works |
40% |
4.944% |
Cenvat credit on inputs not availed |
17 |
Works contracts entered into for maintenance or repair or reconditioning or restoration or servicing of any goods |
70% |
8.652% |
Cenvat credit on inputs not availed |
18 |
For other works contracts, not covered under sr. no. 16 and 17 , including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property |
60% |
7.416% |
Cenvat credit on inputs not availed |
The provisions relating to RCM (Reverse Charge Mechanism) is tabulated below:
In case of Reverse Charge mechanism the service receiver is either required to pay the whole amount of service tax or part of the amount of service tax. Say for example in case of works contract the service recipient is required to pay 50% of the amount of service tax. Again in case of Original works the taxable portion is 40% only. So if the total amount of bill before service tax is Rs 1,00,000 then the service recipient is required to pay Rs 1,00,000*12.36%*40%*50% = Rs 2,472 as service tax under RCM and Rs 2,472 is required to be paid by vendor.
RATES OF SERVICE TAX FOR SERVICE PROVIDER AND RECEIVER UNDER REVERSE CHARGE MECHANISM
|
S.N |
Service |
Service Recipient |
% of Service tax payable |
|
|
Provider |
Recipient |
|||
|
1 |
Provided by person who is located in non-taxable territory and received by any person located in taxable territory (In case of foreign services and services from J&K) | Any person |
Nil |
100% |
|
2 |
Works contract services by individual, HUF, firm or AOP | Body corporate |
50% |
50% |
|
3 |
Manpower supply for any purposes or security services by individual, HUF, firm or AOP | Body corporate |
25% |
75% |
|
4 |
Renting of vehicle to any person who is not engaged in the similar line of business to carry passenger by individual, HUF, firm or AOP – With abatement – Without abatement |
Body corporate |
Nil (With Abatement) 60% (Without Abatement) |
100% (With Abatement) 40% (Without Abatement) |
|
5 |
Support services by Government and Local Authority (excluding renting and 66D (a) (i) to (iii) | Business Entity |
Nil |
100% |
|
6 |
Provided or agreed to be provided by a director of a company to the said company (w.e.f. 7 August 2012 vide Not. 45/2012) | Body corporate |
Nil |
100% |
|
7 |
Individual advocate | Business entity |
Nil |
100% |
|
8 |
Arbitral Tribunal | Business entity |
Nil |
100% |
|
9 |
Sponsorship | Body corporate or Partnership Firm |
Nil |
100% |
|
10 |
GTA (Goods Transport Agency) | Company, P. Firm, Factory, Society, excise registered assessee |
Nil |
100% |
|
11 |
Insurance agent to insurance companies | Insurance business |
Nil |
100% |
Download Reverse Charge Mechanism and Abatement Rate Chart under Service tax
Author Bio
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Regards !
Sir,
What is the Service Tax abatement for the Original construction of complex if the service receiver is a private limited company while the render is a Propeitorship concern under reverse charge mechanism.
sir,
Whether service tax input credit is available for service receiver when he is paying 75% of service tax for man power supply
Dear Sir,
What is the reverse charge applicability on hiring of crane for construction purpose…..?
sir, whether service recipient was not allowed to take cenvat credit of service tax paid under composition scheme as in case of vat not allowed.
who was pay service for rent cab services
Please confirm if we discharge ED on Freight value based on contract value, do we again have to discharge service tax on outward transportation as we added more value for discharging ED
Dear Sir
Is any latest changes in manpower supply or Security services under RCM
Wat is 10.506% in service tax
in case manpower supply agency,the service tax to be paid by service recipient @100% of service tax as per reverse charge mechanism?in such cases how to raise the bill by service provider (whether including service tax or excluding)?
I have a query. a pvt ltd company is receiving services from a goods transport agency. in this case who should get the service tax registration number and who should pay it?
hi ,
i have a doubt regarding the practicalapplicability of the above provisions,
1.for some services , say security services provised by some one , thwy are giving bill without quoting service tax registration no or PAN no
what should we do ??
2.some are charging full ST amount in the invoice .
in the above cases what we should do , if we pay full ST to the SP , is any any voiolation under ST Act.
How can we journal entry for reverse charge entry?
Both for purchaser and seller ? Please tell me how we treat revesrse charge in Tally?
With example
If a transport company hire 3 person as a guard(not belong to any security agency) for 3-4 days who work on a rail yard and paid Rs 300/- per day then the service tax reverse charge mechanism will be applicable on it or not.
Whether Reverse Charge of Service Tax applicable to Partnership firm.
We have a technical consultant for a year whom we are paying monthly of 60,000 against our contract. He is not providing bill with service tax, we are dedcuting TDS- 10% & makes the payment. can we pay RCM Service tax to Govt. Please suggest
Sir,
please tell us how much pay of service tax (reverse mechanic charge)of bill amount for paining of building (work contract)
dear chitrank,
If you are hiring a cab for the company’s employees then you will have to deposit
40% of the bill as a service tax liabilty.for example.
if service provider is issuing bill of Rs 1000 for cab service.
At the time of booking the expense.
Local conveyance A/c Dr.1000
to bank/cash 1000
At the time of paying service tax liabilty
1000*40%=40
local conveyance A/c dr 40
(service tax liabilty)
to bank 40
Dear All,
I have following Query:
– Is RCM applicable to Annual maintenance contract relating to a service which is in nature of Works Contract.
For eg.
AMC Service provided for maintenance of CCTV camera & related systems.
Please guide.
Regards,
Jayesh Sanghani
Our company hired a vehicle to carry employees from home to office & return. Our vendor issue invoive on which no service tax charge. now what % of service tax on reverse charge will be liable to pay.
We are a management consultancy firm having registration under SERVICE TAX. Recently we have provided consultancy service to Airports Authority of India, Coimbatore for developing an Integrated Management System (QMS, EMS & OHSAS) for the airport. We have charged service tax 12.36 % on the Consultancy fee on our invoice. The AAI has paid us 50 % of the service tax amount , claiming that the service provided fall under RCM. Is is correct ? as I understand that our services does not fall under RCM as it is not a Work contract , but consultancy contract. Please guide us with appropriate clarification.
Input of Service Tax Payment under reverse charges mechanism is availbele, so we can book Input against Payment
Labour provided to excavation of cable -under which catagory so that service tax provider received service tax @ 6.18 under RCM………..pls suggest
we are the service receiver.we are paying 75% on Manpower charges,shall we take the input credit which we are paying under RCM?
Sir,
How to confirm that the service provider has the option of abatement for the service he provides? For eg. If he provides vehicle on hire for carrying passengers the service receiver has to pay only 40% of ST under the provisions of abatement. How the service receiver can ascertain whether it is abated or non abated?
Please advise.
What is the rate of ST and who is liable to pay if a person providing services under business auxiliary services and he is also receive commission?
When we are recipients of a Bldg.Repair Contract bill and we have deducted the SERVICE TAX according to the provisions do we have to issue any CERTIFICATE of DEDUCTION and PAYMENT of SERVICE TAX under WORKS CONTRACT to the BLDG.Repair Contractor? If so what is the FORMAT and please provide a link of where it is available.
Thanks
tvs
09/10/14
Dear Sir,
Our (manufacturing) company falls under EOU,
1.Is S.T on annual maintenance charge on machines & equipments covered under RCM.
We are security service provider. We cover under reverse charge ( 25% : 75%). Do we have to raise bill with full 12.36% or just 3.09% is fine.
Company is not providing any taxable service so it has not been registered under service tax, For suppose, later it has to pay service tax under reverse charge mechanism, then before what time the company has to register under service tax, and whether all services which are coming under reverse charge mechansim should be provided in the registration??
Dear Sir,
We are take input credit on goods trasport services or not
We are manufacturing industry and we have paid service tax against Erection and commissioning and also paid service tax for manpower and security charges on RCM.
My question is “the service tax credit on manpower and security charges which was paid by cash against RCM (Service Tax on 75% of service received charges) is to utilize to any other output service
We are manufacturing Industry. We have paid Service Tax on Reverse charges mach. for Manpower and security charges by cash. and also we have paid service tax on Erection and Commissioning.
Shall we adjusted the above service tax credit amount which was paid for manpower and service tax to Erection and commissioning serive.
in a 100% EOU, where there is no import duty on import of machinery.
the invoice by vendor do not shows installation charges, but ready to give a separate certificate saying “THE INVOICE INCLUDES INSTALLATION CHARGES XXXXXXXXXX WITH BREAK UP”
is it acceptable or a separate invoice is required ?
advise please.
Thanking you.
Dear sir,
Our Company is situated in A Place on Rent, Now he has to shift to B Place On Rent. Now In B Place it is to repair building by our Company. In Works Contract in RCM, Company is liable to Pay Service Tax ? If yes Which Rate of service tax. If our company paid full service tax 12.36%, Can we avail Serviec tax Credit ? Please Give Reply ASAP.
Thanks,
Dear sir,
I have done contract for particular wrack loading and unloading of mustard DOC. So am i liable for Service Tax under Reverse Charge Mechanism in manpower supply.
Thanks
We paid Rs 1,00,000 to a Transporter under GTA.
This amount of transportation we are not billing to our customer.We are getting lumsum payment from Them.So we are paying ST on Rs 1,00,000/- under Reverse Charge Mechanism i.e on Rs 25,000 @ 12.36% is Rs 3090.Is this right?
Sir,
If Goods consignment note is not issued by small transporte’s is it Reverse Charge of Service tax appliacble (freight charges accounted on the basis of self prepared vouchers).
pl. update sir
Good article sir. Quick refresher.
Dear Sir,
1.In RCM Work contract service, whether we hava avail abatement of 60% and Charged Service tax 12.36% on 40%. If the party has free supply of any material at the time of Executive of WCT. The Cost of free supply of material is taken into account for calculation of S.T or not.
2. Under WCT, if the work is awarded to sub-contractor. The sub contractor has raised a bill after completion of the work and charged service tax. Is it possible to utilise the Input Service tax for payment S.T. on WCT.
I request your openions on the above 2 points.
Regards
M.V.Sitaramaiah
dear,
all these are there from july-12 so what’s new in this… chart.. ?
correct me if i am wrong… ?
Thanks for sending updates. It is very useful.
The table may also been seen from the download link at the bottom of the tables.
CENVAT credit is available on RCM (Reverse Charge Mechanism) Service tax amount provided the service falls within the definition of input service under Rule 2(l) of Cenvat Credit Rules. The definition of Input service is reproduced below:
Rule 2(l) of Cenvat Credit Rules (as effective from 1-4-2011), defines ‘input service’ as any service:
• used by a provider of output service for providing an output service; or
• used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal,
and includes services used in relation to modernisation, renovation or repairs of a factory, premises of the provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal;
The definition excludes:
(A) service portion in the execution of a works contract and construction services including services listed under clause (b) of section 66E of the Finance Act (hereafter referred to as specified services) in so far as they are used for –
• construction or execution of works contract of a building or a civil structure or a part thereof; or
• laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or
(B) services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital good; or
(BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used by –
• a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person ; or
• an insurance company in respect of a motor vehicle insured or reinsured by such person;
(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption by any employee.
what abtt cenvat credit availment in case of payment made under reverse charge mechanism by the receipient. do we pay and avail credit next month…tks
Was helpful
valuable and useful information.
thanks
Very Useful to finance folk. Suggestion is required
(a)Whether jobwork charges,for making finished goods,are covered under Works contract?
(b) In case when service receipient is a 100% EOU, whether RCM will apply?
(c) When a Individual/ Firm or Body corporate is executing a job work for a 100% EOU or Export unit, in such a case, should service provider
(a) pay service tax?
(b) Should they file ST-3 admit the receipt and claim exemption?
Kindly suggest.
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thanks