In the Budget-2012-13 under the new Reverse Charge Mechanism in certain services the receipient of the service has been made liable to pay tax instead of service provider. In three of services namely hiring of means of transport, construction and man power supply both service receiver and service providers have been made liable to tax in the prescribed percentages.Section 68(2) of the Finance Act, 1994 has been suitably amended in the budget of 2012-13 whereby a proviso has been added to the said section authorising Central Government to notify the service and extent of service tax payable by such person and extent of service tax payable by service receiver.In view of the above proposed amendment notification 15/2012 dt. 17-03-2012 has been issued whereby in the following services, tax will be paid by service receiver to the extent specified in the table:

 Table

Sl.No.
Description of a service
Percentage of  service tax payable by the person providing service
Percentage of service tax payable by the person receiving the service
1
in respect of  services  provided or agreed to be provided  by an insurance agent to any person carrying on insurance business
Nil
100%
2
in respect of  services  provided or agreed to be provided  by a goods transport agency in respect of  transportation  of goods by road
Nil
100%
3
in respect of  services  provided or agreed to be provided  by way of sponsorship
Nil
100%
4
in respect of  services  provided or agreed to be provided  by an arbitral tribunal
Nil
100%
5
in respect of  services  provided or agreed to be provided  by individual advocate
Nil
100%
6
in respect of  services  provided or agreed to be provided  by way of support service by Government or local authority
Nil
100%
7
(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.
Nil
60%
100 %
40%
8.
in respect of  services  provided or agreed to be provided  by way of supply of manpower for any purpose
25%
75 %
9.
in respect of  services  provided or agreed to be provided  by way of works contract
50%
50%
10
in respect of  any taxable services  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
Nil
100%

In works contract service 50% service tax will be paid by the contractor and 50% by the contractee. In works contract service there are two schemes one is composite scheme and other is paying on actual labour and services.

The question is in a single works contract if the contractee and contractor choose different schemes for payment of service tax then how the ratio of 50% will be determined, will the contract be divided in two parts or any other criteria will be adopted? Some more clarifications are required in this regard from CBEC.

(Author – Amit Bajaj Advocate, Bajaj & Bajaj Advocates, 128, Sangam complex, Milap chowk, Jalandhar City (Punjab), Email: amit@amitbajajadvocate.com, M +919815243335)

More Under Service Tax

Posted Under

Category : Service Tax (3413)
Type : Articles (18293)
Tags : Advocate Amit Bajaj (199)

0 responses to “Service Tax Reverse Charge Mechanism requires more clarifications on works contract service”

  1. prabhat says:

    please provide me with works contracts bill format

  2. Abcdef says:

    in case of manpower supply and GTA case, what if the whole service tax is charged by service provider?

  3. SUNIL ANTIL says:

    We have been receiveing monthly repairing bill of Electrical Grinder form Navrattan ( individual prop. firm ).

    Plz confirm wehter this transaction is covered or not under Reverse Service Tax Charges.

    thanks with Regards

  4. Sushil Kori says:

    Dear Sir, If I am a work contractors (Turnkey Contractors) & I am in under composit Scheme & my service tax is 4.94% i.e. 40% on 12.36. So how much I have to & how much to service receiption is it 50% 50%. please reply.

  5. Dayal Kundani says:

    In works contract, the best way to determine the liability of the recepient would be to pay 50% on that amount on which the service provider has paid. After all he has to determine his liability first. We follow next. It would be difficult to determine his liability. So whether it be composite or otherwise, we pay exactly the amount of service tax what he pays.

  6. manishs says:

    if any civil contractor provide service to education institute, then there is an exemption for service tax liability, and he should be quoted it on its invoice, can u provide me sample invoice formats

  7. sandesh says:

    Dear Amit,

    50% amount paid by the service receiver shall be the out of the amount charged in the Invoice by the service provider. The question is if service provider does not charge anything, then what. Lets say he is unregistered although his liability towards service tax registration has arose

  8. athindra kumar says:

    Sir, Please clarify, in case of transport services, the service receiver is made liable for 100% service tax payable.  Can we collect the service tax from the transporter (service provider) and remit to the govt or should the service receiver pay from his side/pocket?  Please clarify. 

Leave a Reply

Your email address will not be published. Required fields are marked *