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SERVICES UNDER REVERSE CHARGE UNDER GST REGIME

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SERVICES UNDER REVERSE CHARGE UNDER GST REGIME
By: Mr. M. GOVINDARAJAN
May 26, 2017
  • Contents

The concept of reverse charge was introduced in the service tax regime vide Notification No. 30/2012, dated 20.06.2012 and came into effect from 20.06.2012.

Under reverse charge, the recipient of service is to pay the tax to the credit of the Central Government.  The reverse charge is of two types – Full reverse charge and partial reverse charge.   Under the full reverse charge, the service recipient is to pay 100% of the tax on the value of services received by him.  Under partial reverse charge, the service recipient is to pay certain percentage of tax on the value of taxable service and the balance amount is to be payable by the service provider.

The Notification No. 30/2012 has met many amendments and as on date the following services come under the net of reverse charge mechanism-

  • in respect of  services  provided or agreed to be provided  by an insurance agent to any person carrying on insurance business – 100%;
  • 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 – 100%;
  • 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)- 100%;
  • in respect of  services  provided or agreed to be provided  by a goods transport agency in respect of transportation  of goods by road – 100%;
  • in respect of  services  provided or agreed to be provided  by way of sponsorship – 100%;
  • in respect of  services  provided or agreed to be provided  by an arbitral tribunal – 100%;
  • 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
  • in respect of  services  provided or agreed to be provided  by Government or local authorityexcluding,- 

(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,1994100%;

  •  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 – 100%;
  • n respect of  services  provided or agreed to be provided  by way of supply of manpower for any purposeor security services – 100%;
  • 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 other than non-assessee online recipient– 100%;
  • n respect of any service provided or agreed to be provided by a person involving an aggregator in any manner – 100%;
  • in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India – 100%;

Under partial reverse charge

  •  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 – service provider – 50% and service receiver – 50%;
  • n respect of  services  provided or agreed to be provided  in service portion in execution  of works contract – service provider – 50% and the service receiver – 50%;

Reverse charge under GST

Section 2(98) of the CGST Act defines the expression ‘reverse charge’ as the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under section 9(3) or (4) or under section 5(3) or (4) of Integrated Goods and Services Tax Act, 2017.

Chapter V of Finance Act, 1994 applies the reverse charge only to the services received by the recipient of services.  But the GST Act makes the reverse charge applicable to  both services and goods.

The provisions of the Act and the rules made there under applicable to the service provider are also applicable to the service recipient under reverse charge mechanism.  In this Act it is provided that the service recipient, who receives services or goods from the unregistered person, is liable to pay service tax under reverse charge mechanism and for this purpose he is to raise an invoice.

Services coming under Reverse charge under GST

Under the provisions of GST there is no partial reverse charge mechanism.  The GST Council in its 14th Council meeting held on 19.05.2017 approved the list of services coming under reverse change mechanism.   Nearly 12 services are coming under reverse charge mechanism.  The service recipients in all these case are liable to pay the entire tax (no partial reverse charge mechanism).  The following table gives the list of services coming under the reverse charge mechanism, who is the service provider who is the service recipient liable to pay the tax under this scheme @ 100%

Sl. No.

Name of service

Provider of service

Recipient of service

1

Services by any person who is located in a non taxable territory and received by any person in the taxable territory other than non assessee online recipient (OIDAR)

Any person who is located in a non taxable territory

Any person located in the taxable territory other than non assessee online recipient (Business recipient)

2

Services by a Goods transport agency in respect of transportation of goods by road

Goods Transport Agency (GTA)

(a)any factory registered under or governed by the Factories Act,1948;

(b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India;

(c) any co-operative society established by or under any law;

(d) any person registered under CGST/SGST/UTGST Act;

(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;

(g) casual taxable person

3

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

An individual Advocate or firm of advocates

Any business entity

4

Services provided by an arbitral tribunal

An arbitral tribunal

Any business entity

5

Sponsorship services

Any person

Anybody corporate or partnership firm

6

Services by Government or local authority excluding-

1.renting of immovable property; and

2. services specified below-

(i) services by the Department of posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;

(ii) services in relation to an aircraft or a vessel inside or outside the precincts of a port or an airport;

(iii) transport of goods or passengers;

Government or local authority

Any business entity

7

Services by a director of a company or a body corporate to the said company or the body corporate

A director of a company or a body corporate

A company or a body corporate

8

Services  by an insurance agent to any person carrying on insurance business

An insurance agent

Any person carrying on insurance business

9

Services by a recovery agent to a banking company or a financial institution or a non banking financial company

A recovery agent

A banking company or a financial institution or a non banking financial company

10

Services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India

A person located in non taxable territory

Importer as defined under clause (26) of section 2 of the Customs Act, 1962.

11

Transfer or permitting the use or enjoyment of a copy right covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works

Author or music composer, photographer, artist etc.,

Publisher, Music company, producer

12

Radio taxi or passenger transport services provided through electronic commerce operator

Tax driver or rent a cab operator

Any person – tax is payable by electronic commerce operator by 100%.

The above list is subject to changes.

 

By: Mr. M. GOVINDARAJAN - May 26, 2017

 

Discussions to this article

 

Sir,

In GST credit of Input service tax paid by service receiver will be available or not.

As in rate chart of GST they said 5 % with NO ITC.

By: yateen vyas
Dated: 26/05/2017

The input tax credit available to the service provider will also be applicable under Reverse charge.

By: MARIAPPAN GOVINDARAJAN
Dated: 27/05/2017

Sir,

In GST REGIME credit of Cash paid which is paid through reverse charge by service receiver will be available or not.

As in rate chart of GST they said 5 % with NO ITC.

By: SUDHIR KINHALE
Dated: 27/05/2017

Sir,

we are asking about rate chart which is saying 5 % with No ITC so this NO ITC will be for whom for service provider or service receiver.

By: yateen vyas
Dated: 28/05/2017

That No ITC with rates are given for providers. Since he is providing services at lesser rate he is not eligible to take credit of any services availed at all.

By: Faizan AliKhan
Dated: 10/06/2017

No ITC with 5% GST on Goods transport Agency Service is applicable when GTA itselt paying GST. Like if GTA providing services to unregistered person then reverse charge will not be applicable and its GTA who will pay GST and no ITC will be available to GTA.

If a company is paying GST under reverse charge @ 5% on GTA Services,then it will pe paid in cash only and upon payment ITC of same will be available to Company.

By: Vipul Singh
Dated: 13/06/2017

Sir,

What about works contracts ?

By: Inder Arora
Dated: 27/06/2017

Sir,

Am a Individual Man Power Supply to Municipal Administration and Milk Cooperative Society and all Government Department and local Authority in Tamilnadu Government. Who is liable for GST Tax?

By: Pon Ramar
Dated: 14/07/2017

sir

For renting of motor cab 5% no itc , what does this mean.

By: satbir singh wahi
Dated: 23/07/2017

Sir,

IF GTA is using the service of Truck Owners by hiring the Trucks, do they need to pay tax on reverse charge as they are using the service of an unregistered person.

By: Anubhav Agrawal
Dated: 17/08/2017

We are a government body (Govt. Hospital) have contract with manpower suppy agency to provide paramedical staff for 6 month. As per agreement, agency will pay monthly salary to worker and will submit bill with all paid challans like esi, epf, cgst etc. We will bear CGHT payment as per bill of service provider. But there is confusion between our department and ser. provider for tax pay challan.. Service provider said that hospital will pay tax amount firstly then agency will tax to govt. But our hospital says that agency will pay tax as per his invoice and submit tax paid challan so we can make payment on that basis.

Pls clarify this confusion as per CGST rule position.

By: Mukesh Meena
Dated: 21/09/2017

 

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