Please make note of an important amendment in Service tax under “ Reverse Charge Mechanism” effective 1st July 2012.
Important services on which reverse charge applicable:
In terms of serial nos. 7(b), 8 and 9 of the table in notification no. 30/2012 dated 20.6.12, the new partial reverse charge mechanism is applicable to services provided or agreed to be provided by way of
(a) renting of a motor vehicle designed to carry passengers on non-abated value to any person who is not engaged in a similar business, or
(b) supply of manpower for any purpose, or
(c) service portion in execution of a works contract;
by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as a body corporate located in the taxable territory. Thus the nature of the service and the status of both the service provider and service receiver are important to determine the applicability of partial reverse charge provisions.
If the contracts are entered by companies/LLP’s with Individuals/HUF/Proprietary firm/Partnership firm to avail the above said services then the service tax liability has to be discharged by the service receiver ( company) and the service provider should not charge service tax/ charge tax as mentioned above in his bills.