Assurance | Advisory | Consultancy

Service Tax under Reverse Charge

Sr. No. Nature of Services Tax to be Paid Note No. Service Provider Service Receiver
Service Provider Service Receiver
1 Insurance Agent Nil 100% (15) - Any Person Insurance Company
1A Recovery Agent Nil 100% (15) 1 Any Person Bank / FI / NBFC
1B Mutul Fund Agent/ Distributor Nil Nil 2 MF Agent MF/AMC
1C Lottery Seller/ Marketting Agent Nil 100% (15) - Seller/Marketting Agent Distributor/ Selling Agent
2 GTA Nill 100% (4.5) 3 Any Person As per Note
3 Sponsorship Services Nil 100% (15) - Any Person Body Corporate/ Firm
4 Arbitral Tribunal Nil 100% (15) 4 Arbitral Tribunal Business Entity
5 Legal (Excl Senior Advocate) Nil 100% (15) 5 Individual/Firm Business Entity
5A Director Service Nil 100% (15) 6 Individual/Firm Business Entity
6 Any Service by Government Nil 100% (15) 7 Government/ Local Authority Business Entity
7 Rent (Passanger Vehicle) Individual/ HUF/ Partnership Firm/ AOP/ LLP Business entity registered as body corporate
After 60 % Abatement Nil 100% (6) 8
Without Abatement 50% (7.5) 50% (7.5)
8 Manpower/Security Nil 100% (15)
9 Works Contract
Exclusive Material (100%) 50% (7.5) 50% (7.5)
Original work (40%) 50% (3.0) 50% (3.0)
Other work (70%) 50% (5.25) 50% (5.25)
10 Import of Service Nil 100% (15) 9 Any Person Any Person
11 Aggregator Services Nil 100% (15) 10 Any Person Any Person
1 The term ‘Recovery Agent’ has not been defined in the service tax laws. However, in trade and common parlance,‘recovery’ refers to the action or process of regaining possession or control of something stolen or lost. Accordingly, “recovery agent” shall mean to be a person who has the power to recover bad (or poor) debts.
2 ‘Mutual Fund Agent or Distributor Services’ were taxable under RCM w.e.f. 01.04.2005 to 30.06.2012.The same had been exempted w.e.f 01.07.2012 vide Notification No.25/2012- ST dated 20.06.2012. The exemption is being withdrawn w.e.f 01.04.2015. However wef 01.04.2016 these services are covered under forward charge vide N8/2016-ST dated 01.03.2016 (w.e.f 01.04.2016)
3 Person Liable: Any person who pays or is liable to pay freight either himself or through his agent if such person is:
a. any factory registered under or governed by the Factories Act, 1948 (63 of 1948); or
b. any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
c. any co-operative society established by or under any law; or
d. any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under; or
e. any body corporate established, by or under any law; or
f. any partnership firm whether registered or not under any law including association of persons.
However, if such person is located in a non-taxable territory, the provider of such service (i.e. GTA) shall be liable to pay service tax.
Abatement : Prior to 31.03.2015, abatement / exemption available on GTA Services was 75%, which has been reduced to 70%w.e.f. 01.04.2015.
Further transport of household goods has been excluded from the reverse charge preview as such services is availed by individuals and create confusion.
4 Services of an arbitral tribunal are exempted if service receiver is:
a. any person other than a business entity; or
b. a business entity with a turnover up to rupees ten lakh in the preceding financial year.
5 Legal services (i.e. services of an advocate or firm of advocates) are exempted if service receiver is:
a. an advocate or partnership firm of advocates providing legal services; or
b. any person other than business entity; or
c. a business entity with a turnover up to rupees ten lakh in the preceding financial year.
Services provided by Sr advocates are now covered under forward charge from 01.04.2016
6 Services of Director of a ‘Body Corporate’ has been included in the purview of Director Services, w.e.f 11.07.2014. Service provided by a director incapacity of an employee of the Company or Body Corporate shall not be chargeable to service tax. Deduction of TDS under salary head can establish the same.
7 Earlier(up to 31.03.2016) RCM is applicable on all “Support Services” provided by Government or Local Authority except the following:
a. Renting of Immovable Property,
b. Services by Department of Post by way of Speed Post, Express Parcel Post, Life Insurance and Agency Services;
c. Services in relation to aircraft or a vessel, inside or outside the precincts of a port or an airport;
d. Transportation of goods or passengers.
Vide the Finance Bill 2015, it is proposed to extend to “Any Service” with effect from a date to be notified.Now as per Finance act 2016 any services provided by Govt or Local authority (except a to d shown above) is covered under reverse charge wef 01.04.2016.
8 No reverse charge is applicable, in case of similar line of business.
9 Where any taxable service is provided by a person located in non–taxable territory and as per the Place of Provision Rules 2012; Place of provision of the service is determined to be in the taxable territory, such service will be considered as Import of Service.
10 In relation to service provided or agreed to be provided by a person involving an aggregator in any manner, the person liable to pay tax is the aggregator of the service (or any person representing the aggregator for any purpose or designated if aggregator does not have a physical presence in the taxable territory).
“Aggregator” means a person, who owns and manages a web based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator.
‘Small Service Provider’ exemption of Rs. 10 lakh is not available to recipient of service.