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Chart of Service Tax Provisions under Reverse Charge Mechanism

1. Point of taxation under reverse charge mechanism is date of payment to the service provider provided payment must happen within 6 months from the date of invoice otherwise point of taxation will be date of invoice. Invoice needs to be issued by the service provider within 30 days of completion of each event/service. If invoice is not issued within the specified time, point of taxation will be the date of completion of provision of service.

Provided that in case of “associated enterprises”, where the person providing the service is located outside India, the point of taxation shall be the date of debit in the books of account of the person receiving the service or date of making the payment whichever is earlier.

For any service whose point of taxation has been determined and whole liability affixed before 1.7.2012/7.8.2012, the new provisions will not apply. Merely because payments are being made on or after 1.7.2012/7.8.2012 will not add any additional liability on the service receiver in respect of such services.

2.Service tax under reverse charge is applicable even if service provider is exempt from service tax up to the taxable value of 10 Lac. There is no threshold limit of exemption for the service receiver under reverse charge mechanism.

3.Input credit of service tax paid by recipient under reverse charge mechanism can be availed on the basis of tax payment challan. In case of Banks and NBFCs, Rule 6(3B) of CENVAT rules will also apply to input credit of service tax paid under reverse charge mechanism.

4.In the following cases, 100% service tax liability rests with the service provider only if service provider is a corporate entity:-

i.Renting of motor vehicle

ii.Manpower services & security Services

iii.Works contract

In the above cases, service recipient will pay nothing under reverse charge mechanism.

Source - http://taxguru.in/

5.It is the responsibility of service recipient to determine whether particular works contract covered under 11(a) to 11(c) is leviable to VAT or not. Service recipient is liable under reverse charge mechanism even if service provider does not charge VAT/WCT in invoice if VAT/WCT is otherwise applicable.

6.Provisions relating to works contract are applicable even if material is purchased from a separate person other than the person rendering services or under separate agreement or under separate invoice.

7.Valuation of Works Contract covered under 11(a) to 11(c) = Gross amount charged in invoice by service provider for labour and material used in execution of works contract (excluding taxes) plus fair market value of goods supplied by the service recipient used in execution of works contract (excluding taxes) less amount charged by service recipient from service provider in respect of goods supplied in relation to works contract.

If the service provider segregates the amount of labour and material in the invoice, service provider (non-company) will charge service tax @ 6.18% on labour amount in invoice and the same amount of service tax calculated @ 6.18% on labour amount as mentioned in the invoice will be paid by service recipient under reverse charge mechanism to the Government directly. However, if the service provider is a company, it will charge service tax @ 12.36% on labour amount in invoice and service recipient will pay nothing under reverse charge mechanism to the Government. If segregation is not possible, service tax rate as per chart will be applicable.

Valuation of other Services = Gross amount charged in invoice by service provider in respect of services (excluding taxes)

Source - http://taxguru.in/

Chart

Sl.

Description of a

Explanation

ST rate

ST rate

ST rate

No.

service

 

applicabl

to be

to be

 

 

 

e to

charged

charged

 

 

 

service

by

by

 

 

 

recipient

service

service

 

 

 

under

provider

provider

 

 

 

reverse

in

(compan

 

 

 

charge

invoice

y, refer

 

 

 

mechanis

(non-

point no.

 

 

 

m

company)

4 of

 

 

 

 

 

notes)

1

Services of an

Covered: Payment to insurance

12.360%

 

 

 

insurance agent to

agents by insurance companies

 

-

-

 

any person

for their services. Service

 

 

 

 

carrying on

recipient’s liability is 100%.

 

 

 

 

insurance

 

 

 

 

 

business w.e.f.

 

 

 

 

 

01/07/2012.

 

 

 

 

 

This was in effect

 

 

 

 

 

even before

 

 

 

 

 

finance act, 2012.

 

 

 

 

2

Services of goods

Covered: Transportation of

3.090%

 

 

 

transport agency

goods by road through a GTA

 

-

-

 

in respect

which issues a consignment

 

 

 

 

of transportation

note, by whatever name called.

 

 

 

 

of goods by road

Person who pays or is liable to

 

 

 

 

w.e.f.

pay freight shall be treated as

 

 

 

 

01/07/2012. This

the person who receives the

 

 

 

 

was in effect even

service. Excluded: Courier,

 

 

 

 

before finance act,

express cargo, carriage of

 

 

 

 

2012.

certain food/drink items, freight

 

 

 

 

 

upto Rs. 750/- per consignee

 

 

 

 

 

per carriage and upto Rs.

 

 

 

 

 

1500/- per goods carriage.

 

 

 

 

 

Service recipient’s liability is

 

 

 

 

 

100%.

 

 

 

3

Services by way of

Covered: All sponsorships.

12.360%

 

 

 

sponsorship w.e.f.

Excluded:

 

-

-

 

01/07/2012. This

Advertisement/business

 

 

 

 

was in effect even

promotion, certain sports

 

 

 

 

before finance act,

related sponsorships. Service

 

 

 

 

2012.

recipient’s liability is 100%.

 

 

 

4

Services of an

Covered: Any payment for any

12.360%

 

 

 

arbitral tribunal

service. Service recipient’s

 

-

-

 

w.e.f.

liability is 100%.

 

 

 

 

01/07/2012.

 

 

 

 

5

Services of

Covered: Advice, consultancy

12.360%

 

 

 

advocates

or assistance in any branch of

 

-

-

 

(individual/firm)

law, in any manner and

 

 

 

 

w.e.f.

includes representational

 

 

 

 

01/07/2012.

services before any court,

 

 

 

 

 

tribunal or authority. Service

 

 

 

 

 

recipient’s liability is 100%.

 

 

 

 

 

 

 

 

 

Source - http://taxguru.in/

6

Services of

Covered: Any payment to non-

12.360%

-

-

 

directors of a

executive directors for any

 

 

company w.e.f.

service e.g. sitting fee,

 

 

 

 

07/08/2012.

reimbursements. Excluded:

 

 

 

 

 

Executive/directors in

 

 

 

 

 

employment. If Company itself

 

 

 

 

 

arranges lodging, fooding,

 

 

 

 

 

travelling etc. for the non-

 

 

 

 

 

executive directors and the bill

 

 

 

 

 

is raised in the name of the

 

 

 

 

 

Company. However, it may be

 

 

 

 

 

covered under any other

 

 

 

 

 

category e.g. car hire charges.

 

 

 

 

 

Service recipient’s liability is

 

 

 

 

 

100%.

 

 

 

7

Support services

Covered: Services of police, fire,

12.360%

 

 

 

by Government or

ambulance etc. Excluded:

 

-

-

 

Local Authority

Renting of immovable property,

 

 

 

 

w.e.f.

services of Department of Posts

 

 

 

 

01/07/2012.

by way of speed post, express

 

 

 

 

 

parcel post, life insurance and

 

 

 

 

 

agency services, services in

 

 

 

 

 

relation to an aircraft or a

 

 

 

 

 

vessel, transport of goods or

 

 

 

 

 

passengers, municipal, public

 

 

 

 

 

convenience and other public

 

 

 

 

 

services like water supply,

 

 

 

 

 

sanitation, and solid waste

 

 

 

 

 

management. Service recipient’s

 

 

 

 

 

liability is 100%.

 

 

 

8

Import of service

Covered: Any payment for

12.360%

 

 

 

w.e.f.

import of taxable services from

 

-

-

 

01/07/2012. This

any place outside India. Service

 

 

 

 

was in effect even

recipient’s liability is 100%.

 

 

 

 

before finance act,

 

 

 

 

 

2012.

 

 

 

 

9

(a) Renting of

If service provider is not availing

4.944%

 

4.944%

 

a motor vehicle

input credit, 9(a) is applicable

 

-

 

 

designed to carry

otherwise 9(b) is applicable.

 

 

 

 

passengers on

Covered: Hiring passenger

 

 

 

 

abated value

cars, cabs, buses etc.

 

 

 

 

w.e.f.

Excluded: Radio taxi, metered

 

 

 

 

01/07/2012.

cab, three wheeler, auto

 

 

 

 

 

rickshaw, stage carrier, contract

 

 

 

 

(b) Renting of

4.944%

7.416%

12.360%

 

carriage and packaged tour,

 

a motor vehicle

 

 

 

 

public transport not

 

 

 

 

designed to carry

 

 

 

 

predominantly for tourism

 

 

 

 

passengers on

 

 

 

 

purpose e.g. Meru cabs, bus

 

 

 

 

non abated value

 

 

 

 

w.e.f.

having contract permit hired for

 

 

 

 

transportation of employees.

 

 

 

 

01/07/2012.

 

 

 

 

Service recipient’s liability is

 

 

 

 

 

 

 

 

 

 

100% in case of 9(a) and in case

 

 

 

 

 

of 9(b) service recipient’s

 

 

 

 

 

liability is 40% and service

 

 

 

 

 

provider's liability is 60%.

 

 

 

Source - http://taxguru.in/

10

Supply of

Covered: Payment for services

9.270%

3.090%

12.360%

 

manpower for any

of the staff seconded/deputed

 

 

 

 

purpose w.e.f.

with the company under an

 

 

 

 

01/07/2012 or

arrangement where the staff

 

 

 

 

security services

remains on the payroll of the

 

 

 

 

w.e.f.

original employer only, payment

 

 

 

 

07/08/2012.

for services of staff (not on

 

 

 

 

 

payroll of the recipient of

 

 

 

 

 

service) supplied by an

 

 

 

 

 

agent/person under an

 

 

 

 

 

arrangement where it is placed

 

 

 

 

 

operationally under the

 

 

 

 

 

superintendence or control of

 

 

 

 

 

the recipient of service (e.g.

 

 

 

 

 

housekeeping staff supplied by

 

 

 

 

 

manpower agency), all

 

 

 

 

 

security/detective services.

 

 

 

 

 

Excluded: Joint employment,

 

 

 

 

 

outsourcing the activity/service

 

 

 

 

 

itself e.g. outsourcing house-

 

 

 

 

 

keeping work to an outside

 

 

 

 

 

agency instead of getting the

 

 

 

 

 

manpower supplied by an agent

 

 

 

 

 

for house-keeping work,

 

 

 

 

 

Recruitment/placement agency

 

 

 

 

 

service. Service recipient’s

 

 

 

 

 

liability is 75% and service

 

 

 

 

 

provider's liability is 25%.

 

 

 

 

 

 

 

 

 

11

(a) Works contract

Covered: Any contract involving

2.472%

2.472%

4.944%

 

w.e.f.

the use of labour plus material

 

 

 

 

01/07/2012.

on which VAT is leviable under

 

 

 

 

 

any schedule of VAT Act on any

 

 

 

 

 

material used in execution of

 

 

 

 

 

works contract and such

 

 

 

 

 

contract is for any new

 

 

 

 

 

construction; any addition and

 

 

 

 

 

alteration to abandoned or

 

 

 

 

 

damaged structures on land

 

 

 

 

 

that are required to make them

 

 

 

 

 

workable; any erection,

 

 

 

 

 

commissioning or installation of

 

 

 

 

 

plant, machinery or equipment

 

 

 

 

 

or structures, whether pre-

 

 

 

 

 

fabricated or otherwise. Service

 

 

 

 

 

recipient’s liability is 50% and

 

 

 

 

 

service provider's liability is

 

 

 

 

 

50%.

 

 

 

Source - http://taxguru.in/

 

(b) Works contract

Covered: Any contract involving

4.326%

4.326%

8.652%

 

w.e.f.

the use of labour plus material

 

 

 

 

01/07/2012.

on which VAT is leviable under

 

 

 

 

 

any schedule of VAT Act on any

 

 

 

 

 

material used in execution of

 

 

 

 

 

works contract and such

 

 

 

 

 

contract is for maintenance or

 

 

 

 

 

repair or reconditioning or

 

 

 

 

 

restoration or servicing of any

 

 

 

 

 

goods e.g. AMC of movable

 

 

 

 

 

items/office equipments.

 

 

 

 

 

Service recipient’s liability is

 

 

 

 

 

50% and service provider's

 

 

 

 

 

liability is 50%

 

 

 

 

(c) Works contract

Covered: Any contract involving

3.708%

3.708%

7.416%

 

w.e.f.

the use of labour plus material

 

 

 

 

01/07/2012.

on which VAT is leviable under

 

 

 

 

 

any schedule of VAT Act on any

 

 

 

 

 

material used in execution of

 

 

 

 

 

works contract and such

 

 

 

 

 

contract is other than as

 

 

 

 

 

mentioned under 11(a) & 11(b)

 

 

 

 

 

or is for maintenance, repair,

 

 

 

 

 

completion and finishing

 

 

 

 

 

services such as glazing,

 

 

 

 

 

plastering, floor and wall tiling,

 

 

 

 

 

installation of electrical fittings

 

 

 

 

 

of an immovable property e.g.

 

 

 

 

 

interior and furnishing work,

 

 

 

 

 

electrical work of items other

 

 

 

 

 

than movable ones. Service

 

 

 

 

 

recipient’s liability is 50% and

 

 

 

 

 

service provider's liability is

 

 

 

 

 

50%

 

 

 

CA. Abhishek Gupta Mumbai +919892510074

Source - http://taxguru.in/