Reverse Charge Mechanism under New Service Tax Regime

CA Rajender Handa

S. No.	Service Provider	Service Recipient	Proportion of Tax by Ser. Provider	Proportion of Tax by Ser. Receiver
1.	Insurance Agent	Person Carrying on Insurance Business	Nil	100%
2.	GTA in respect of Transport of Goods by road	Consignor or Consignee (Person liable to pay freight):-v Factory Regd. Under Factories Act, 1948. v Any society regd. Under any law v Any cooperative society under any law v Dealer reg. under central excise act or its rules v Any body corporate established by or under any law v Any partnership firm whether regd. Or not under any law, including AOP.	Nil	100%
3.	Service by way of Sponsorship.	Any body corporate or Partnership firm.	Nil	100%
4.	A. Arbitral tribunal orB. Individual Advocate or firm of advocates C. Govt. or local authority by way of support service excluding (a) renting of immovable property (b)  services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government (c) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport (d) transport of goods or passengers	Any business entity located in taxable territory	Nil	100%
5.	A. Renting of motor vehicle to carry passenger to person who is not in similar line of business,B. Manpower Supply C. Service Portion of Work Contract By Individual , HUF, Partnership Firm, AOP located in taxable territory	Any business entity registered as Body corporate, located in taxable territory.	A.   Nil if on abated value, 60%  on full Value B.   25% C.   50%	A. 100%, if on abated value, 40% on full value B.  75% C.  50%
6	Person located in non taxable territory	Person located in non taxable territory.	Nil	100%

Explanation-I. – The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

Explanation-II. – In works contract services, where both service provider and service recipient is the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service.

Important Definitions

1. “partnership firm” includes a limited liability partnership; Rule 2(1)(cd) of service tax rules 1994

2.As per section 2 of companies act, 1956 “body corporate” includes a company incorporated outside India but does not include-

 (a) a corporation sole;

 (b) a co-operative society registered under any law relating to co-operative societies; and

(c) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf;] Rule 2(bc) of service tax rules, 1994

3. “business entity” means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession; Section 65B(17), i.e. includes individual, huf, sole proprietorship.

Exemptions

1. Services provided by-

(a) an arbitral tribunal to –

(i) any person other than a business entity; or

(ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year;

(b) an individual as an advocate or a partnership firm of advocates by way of legal services to,-

(i) an advocate or partnership firm of advocates providing legal services ;

(ii) any person other than a business entity; or

(iii) a business entity with a turnover up to rupees ten lakh in the preceding financial year; or

(c) a person represented on an arbitral tribunal to an arbitral tribunal;

2. Services by way of sponsorship of sporting events organised,-

(a) by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone;

(b) by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;

(c) by Central Civil Services Cultural and Sports Board;

(d) as part of national games, by Indian Olympic Association; or

(e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;

3. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or altertion of-

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

(c) a structure meant predominantly for use as

(i) an educational,

(ii) a clinical, or

(iii) an art or cultural establishment;

(d) canal, dam or other irrigation works;

(e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

(f) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;

4. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;

(b) a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National UrbanvRenewal Mission or Rajiv Awaas Yojana;

(c) a building owned by an entity registered under section 12 AA of the Income tax Act, 1961 (43 of 1961) and meant predominantly for religious use by general public;

(d) a pollution control or effluent treatment plant, except located as a part of a factory; or

(e) a structure meant for funeral, burial or cremation of deceased;

5  Services by way of construction, erection, commissioning, or installation of original works pertaining to,-

(a) an airport, port or railways, including monorail or metro;

(b) a single residential unit otherwise than as a part of a residential complex;

(c) low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

(d) post-harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or

(e) mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;

6. Services provided by a goods transport agency by way of transportation of –

(a) fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage;

(b) goods where gross amount charged for the transportation of goods on a consignment transported in a single goods carriage does not exceed one thousand five hundred rupees; or

(c) goods, where gross amount charged for transportation of all such goods for a single consignee in the goods carriage does not exceed rupees seven hundred fifty.

7. Services by way of giving on hire-

(a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or

(b) to a goods transport agency, a means of transportation of goods

8 Services by the following persons in respective capacities –

(g) business facilitator or a business correspondent to a banking company or an insurance company, in a rural area; or

(h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt

“business facilitator or business correspondent” means an intermediary appointed under business facilitator model or business correspondent model by a banking company or an insurance company under the guidelines issued by Reserve Bank of India.

9.  Services received from a provider of service located in a non- taxable territory by-

(a) Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession;

(b) an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or

(c) a person located in a non-taxable territory;

10 Services by Employees’ State Insurance Corporation to persons governed under the Employees’ Insurance Act, 1948 (34 of 1948);

11 Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution.