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Arun Kumar Singh

Arun Kumar SinghSection 68(2) of the Finance Act, 1994 provides for liability to pay service tax by a person other than service provider for certain specified services. This is generally known as “reverse Charge system”. These scopes of services covered by the reverse charges mechanism has been enhanced by the Finance Act, 2012 read with Notification No. 15/2012- ST dated 17th March 2012. Many services which were before this notification not covered by reverse charge shall now come within its purview. We shall examine the services covered by the reverse charge mechanism and any possible implications arising out of them with special focus on new services added by the Notification No. 15/2012-ST.

Nature of Services: Notification No. 15/2012 covers following kind of services under reverse charge along with the percentage of tax liability payable by service provider and service receiver respectively. We have divided the services covered by the Notification under five categories for ease of reference.

Services covered under reverse charge system vide Notification No. 30/2012-ST Dated-20th June, 2012 with effect from 01.07.2012:

SL. No. Description of a Service Service provider Service Receiver Percentage of service tax payable by the person providing service

 

Percentage of service tax payable by the person receiving the service
1. Insurance Services: in respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business Insurance Agent Business mancarrying on insurance business Nil 100
2. GTA:in respect of services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road Goods transportagency Consignor or Consignee is specified person Nil 100
3. Sponsorship: in respect of services provided or agreed to be provided by way of sponsorship Any person Bodycorporate or partnership firm Nil 100
4. Arbitral Tribunal: in respect of services provided or agreed to be provided by an arbitral tribunal Arbitraltribunal Business entity Nil 100
5. Advocate Services:in respect of services provided or agreed to be provided by individual advocate Individual Advocate Business entity Nil 100
5A. A director of a company:In respect of services provided or agreed to be provided by a director of a company to the said company A director of a company To the said company Nil 100
6. Support Services:in respect of services provided or agreed to be provided by way of support service by Government or local authority Government Business entity Nil 100
7. Rent a Cab Service: (a) In respect of services provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger on abated value.

(b) In respect of services provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger on non-abated value.

Individual/HUF/Proprietary or partnership firm/AOP Companyunder Companies Act, 1956 Nil

 

 

 

 

 

 

60

100

 

 

 

 

 

 

40

8. Supply of Manpower/ security services: in respect of services provided or agreed to be provided by way of supply of manpower for any purpose Individual/HUF/Proprietary or partnership firm/AOP Companyunder Companies Act, 1956

 

25 75
9. Works Contract Services: in respect of services provided or agreed to be provided by way of works contract Individual/HUF/Proprietary or partnership firm/AOP

 

Companyunder Companies Act, 1956 50 50
10. in respect of any taxableservices provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory Any person Any person Nil 100

 Availment of Cenvat Credit by service receiver:

Service receiver may claim the credit credit of service tax paid based on the invoice issued by the service provider. For service tax paid on reverse charge, credit may be claimed based on the TR-6 challan by which payment is made. Service receiver will not pay the service tax from cenvat credit under the reverse charge mechanism.

(Author can be reached at arunks03@gmail.com)

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0 Comments

  1. Rajender Sharma says:

    Respected Sir,

    We have appointed C&A and paying commission on monthly basis. We are a Pvt.Ltd. Company, we are liable to pay service tax to C&A if commission amount is below Rs.9.00 Lac p.a.C&A Charging Service Tax From us with commission amount @ 14 %.

  2. Anjali Gauns says:

    1] we are empanelled agency for providing manpower to state govt. depts.
    2] the empanelment was done by one of the Govt. Dept of state following all the codal formalities.
    3] the RFP for the above did not mention any thing about the service tax.
    4] being unaware that these services are service taxable, we did not collect service tax from our clients nor we paid the same.
    5] however, we paid the due service tax ourselves and later requested for reimbursement from clients when we came to know our mistake.
    Hide message history
    6] clients denied referring us the empanelment circular, which is silent on service tax.
    7] their version is that the empanelled rates are inclusive of service tax.
    8] please advice.

  3. Viren says:

    Dear Sir,

    Service tax exemption is available on for service income received. For payment on reverse charge basis no initial exemptions are available.

    Thanks

  4. SUNIL DUTT SHARMA says:

    I have paid to contractor who is not registered in service tax ( turnover of contractor is below Rs. 9 Lakh). And my company is pvt ltd company. even that i have to deposit the service tax ?

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