Reverse charge and joint charge on service tax

Joint charge and Reverse charge mechanism

Central government in the notification no. 30/2012-ST the  cases of reverse charge mechanism . This transaction are introduced wef. 1-JUL-2012

1. Service  provided or to be provided by an insurance agents to insurance agents i.e.,  service tax implications  on commission charged by insurance agents.

Service tax is payable by service receiver  and not by service provider In other words Insurance company will pay service tax and not agent.

2. Service  provided or agreed to be provided by an arbitral tribunal (Arbitrators)

Service tax is paid by the parties to the arbitrator. As of now this service is included mega exemption so service tax is exempt.

3. Service  provided or agreed to be provided by individual advocate or a firm of advocates by way of legal service. Service recipient i.e., party to advocate will pay service tax. Exempt from service tax as it is included in mega exemption.

4. Taxable service provided or agreed to be provided by government or local authority(Services which are not included in the negative list and mega exemption) by way of support services excluding renting of immovable property, Tax is payable by the recipient of service.

5. Service provided or agreed to be provided by any person who is located in a non-taxable territory ( Jammu  & Kashmir and countries other than India) and provide services in the taxable territory so as per place of provision rules service tax is applicable and is paid by the recipient  of service.

6. Service provided or agreed to be provided by an independent director (non-employee) service tax is paid by service receiver In other words service tax is paid by the company to which to which independent director is appointed.

7. Service 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. If service provider has not opted for partial reverse charge then service tax 100% is payable by service recipient( applicable to service provider is individual or partnership firm and the receiver is the body corporate).

8. Service provided or agreed to be provided by goods transport agency in respect of goods transported by road. This service are entitle to 75% abatement and 25% service tax is paid by service recipient under RCM. Determination of service recipient will depend upon who pays to GTA and place of provision rules will decide the applicability of service tax . In certain cases when both consignor and consignee are unregistered firm or individuals then RCM is not applicable and service tax is paid by GTA service.

Service provided or agreed to be provided by way of sponsorship. Service tax is payable by sponsors under  RCM.

Joint charge/Partial reverse charges mechanism

1. Service 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. If the service provider agrees for partial reverse charge then  60% of the total service tax amount is payable by service provider and rest 40% is payable by service receiver.

2. Service provided or agreed to be provided by way of supply of manpower for any purpose or security service (Applicable only when service provider is an individual or partnership firm and the customer is body corporate).The service provider and service receiver will pay 25% and 75%  of total service tax respectively.

3. Service  provided or agreed to be provided in service portion in execution of works contract (In declared service)(applicable only when service provider is an individual or partnership firm and customer is a body corporate) Service tax is paid 50% by service provider and service recipient each.

By: Parth Jatania