Reverse Charge Mechanism in service tax-more clarifications in works contract service required

[AMIT BAJAJ ADVOCATE]

 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