Reverse Charge Mechanism

Service Tax- Reverse Charge Mechanism

CA Pratik MehtaAPMH & ASSOCIATE LLPChartered Accountants

Salient features of Reverse Charge

2

Brief History of Reverse Charge RCM introduced w.e.f 01.01.2005 via notification

no 36/2004. The Reverse Charge was introduced in Service Tax

vide Budget of the year 2005-2006. At that point of time there was only few services which was covered under Reverse Charge. However, with the passage of time this list has been expanded and at present this list contains 11 services into it which covers both full Reverse Charge and Partial Reverse Charge.

Payment of service tax.(section 68)

3

(1) Every person providing taxable service to any person shall pay service tax at the rate specified in section [66B] in such manner and within such period as may be prescribed.

(2) Notwithstanding anything contained in sub-section (1), in respect of [such taxable services as may be notified] by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section [66B] and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.

[Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.]

Notification No. 30/2012-ST, dated 20th June, 2012 w.e.f 01.07.2012

Service Provider

• Insurance Agent

Service Receiver

• Any person carrying on Insurance business

4

Sr. No.

Description of a service

(Insurance Auxiliary Service)

w.e.f 01.07.2012

Percentage of service

Percentage of service tax payable by any person liable for paying service tax other than the service provider

1.

In respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business

NIL 100%

5

Service Provider

•Recovery Agent

Service Receiver

• Banking company or a financial institution or a non-banking financial company

Sr. No.


(Recovery Agent services )

w.e.f 11.07.2014



1A.

In respect of services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company

NIL 100%

6

Sr. No.


(Selling or marketing agent services)

w.e.f 01.04.2016



1C.

In respect of services provided or agreed to be provided by a selling or marketing agent of lottery tickets in relation to lottery in any manner to a lottery distributor or selling agent of the State Government under the provisions of the Lottery (Regulations) Act, 1998 (17 of 1998)

NIL 100%

7

Service Provider

•Selling or marketing agent of lottery tickets

Service Receiver

•Lottery distributor or selling agent of the State Government

8

Service Provider

• Goods Transport Agency

Service Receiver

• Factory• Society (Inc. Co-Op Hsg)• Registered Dealer of

Excisable Goods• Body Corporate• Partnership Firm• AOP

Sr. No.


(GTA Services)

w.e.f 01.07.2012



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%

9

Sr. No.


(Sponsorship Services)

w.e.f 01.07.2012



3.In respect of services provided or agreed to be provided by way of sponsorship.

NIL 100%

Service Provider

• Any Person

Service Receiver

• Any body corporate or partnership firm located in the taxable territory

10

Service Provider

• Arbitral Tribunal

Service Receiver

• Business Entity located in TT with turnover exceeding Rs. 10 lakhs in PY

Sr. No.


(Arbitral tribunal Services)

w.e.f 01.07.2012



4.In respect of services provided or agreed to be provided by an arbitral tribunal.

NIL 100%

11

Sr.No.


(Legal Services)

w.e.f 01.04.2016



5.

In respect of services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly

NIL 100%

Service Provider

• Individual• Firm other than representational services by senior advocates

Service Receiver

• Business Entity having turnover exceeding Rs.10 Lakhs located in taxable territory in P.Y

12

Sr. No.


(Director services)

w.e.f. 07.08.2012



5A.

In respect of services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate

NIL 100%

Service Provider

• Director

Service Receiver

• Company• Body Corporate

13

Sr. No.


(Government services)

w.e.f 01.07.2012



6.

In respect of services provided or agreed to be provided by Government or local authority excluding,- (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994

NIL 100%

Service Provider

• Government• Local Authority

Service Receiver

• Business Entity located in TT with turnover exceeding Rs. 10 lakhs in PY

14

Sr. No.


(Renting of a motor vehicle)

w.e.f 01.07.2012



7.

(a)in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business.

(b) in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business

Nil

50%

100 %

50%

15

Service Provider

• Individual• HUF• Proprietary Firm• Partnership Firm• AOP

Service Receiver

• Business Entity registered as body corporate located in the taxable territory

16

Sr. No.


(Supply of manpower & Security Services)

w.e.f .01.07.2012



8.

In respect of services provided or agreed to be provided by way of supply of manpower or security service for any purpose or security services

Nill 100 %

Service Provider


Service Receiver


17

Sr. No.


(Works Contract Services)

w.e.f .01.07.2012



9.In respect of services provided or agreed to be provided by way of works contract 50% 50%

Service Provider


Service Receiver


18

Sr. No.


(Import of Services)

w.e.f .01.07.2012



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

Nill 100%

Service Provider

• Any Person

Service Receiver

• Any person

19

Sr. No.


(Aggregators Services)

w.e.f .01.03.2015



11.In respect of any service provided or agreed to be provided by a person involving an aggregator in any manner

Nill 100%

Service Provider

• Any Person

Service Receiver

• Any Person

Its very is easy say to lie but is very difficulty to say only one lie.

Reverse Charge Mechanism

Economy & Finance

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