Applicability of New Reverse Charge Mechanism under Service Tax Law

[CS Swati Dodhi]

As the Union Budget has proposed multiple changes in Service Tax in light of Negative List of Services, an important aspect of burden of tax liability under Reverse Charge concept has also been proposed to be replaced from existing provisions.

Applicability of New Reverse Charge Mechanism

According to Notification No 15/2012-ST dated 17.03.2012, the proposed Reverse Charge Mechanism will be made applicable from the date on which Section 66B of the Finance Act, 1994 comes into force. The said Section 66 will come into force only upon the date when the Finance Bill, 2012 is passed by the Parliament and receives the consent of the Hon’ble President of India to be called as Act.

Therefore, the new reverse charge mechanism will be applicable from the date when Finance Bill, 2012 is enacted. 

Clarification on new reverse charge mechanism in respect of services of Rent –a – cab, Manpower Supply and Works Contract

Under the new reverse charge mechanism will also be applicable in respect of

a)   Rent – a – cab service

b)   Manpower power supply service

c)   Works Contract service

However, this reverse charge under above mentioned three services will be applicable only if, the service provider of these 3 services is an Individual or HUF or Proprietary or partnership firm or AOP and the service receiver is a Company registered under Companies Act, 1956

Details and applicability of new reverse charge mechanism in case of all the services:

Description of a service	Service provider	Service receiver	Percentage of  service tax payable by the person providing service	Percentage of service tax payable by the person receiving the service
Insurance Services in respect of services  provided or agreed to be provided  by aninsurance agent to any person carrying on insurance business	Insurance agent	Business man carrying on insurance business	Nil	100
GTA in respect of services  provided or agreed to be provided  by a goods transport agency in respect of transportation  of goods by road	Goods transport agency	Consignor or Consignee is specified person	Nil	100
Sponsorship in respect of services  provided or agreed to be provided  by way of sponsorship	Any person	Body corporate or partnership firm	Nil	100
Arbitral Tribunal in respect of services  provided or agreed to be provided  by an arbitral tribunal	Arbitral tribunal	Business entity	Nil	100
Advocate Services in respect of services  provided or agreed to be provided  by individual advocate	Individual advocate	Business entity	Nil	100
Support Service in respect of services  provided or agreed to be provided  by way of support service by Government or local authority	Government	Business entity	Nil	100
Rent a Cab Services (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.	Individual/HUF/ Proprietary or partnership firm/AOP	Company under Companies Act, 1956	Nil 60	100 40
Supply of Manpower in respect of services  provided or agreed to be provided  by way of supply of manpower for any purpose	Individual/HUF/ Proprietary or partnership firm/AOP	Company under Companies Act, 1956	25	75
Works Contract Services in respect of services  provided or agreed to be provided  by way of works contract	Individual/HUF/ Proprietary or partnership firm/AOP	Company under Companies Act, 1956	50	50
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	Any person	Any person	Nil	100