Service tax reversemechanism

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sappagi.dass (Querist)
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02 March 2017 Dear all

Please explain me briefly regarding service tax reverse mechanism with examples????

waiting for good answer

thanks & regards

Sappagi dass

Tony John

Tony John (Expert)
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02 March 2017 Generally service tax (ST) is payable by the service provider. So when he bills for his service, he shall include ST also. This will be remitted to govt.
But in reverse charge mechanism (RCM), service provider shall bill only for value of service. ST will directly be paid to govt by service recepient. Then there is partial reverse charge mechanism where both service provider and service receiver are jointly made liable to pay service tax.
Eg for RCM - Services by an insurance agent to any person carrying on insurance business. When insurance agent (SP) provides services to insurance company(SR), insurance co shall pay ST directly to the govt.
Eg for P-RCM - On service portion in execution of works contract, SP is liable to pay service tax on 50% portion and balance 50% is to be paid directly by SR under reverse charge mechanism.

Tony John

Tony John (Expert)
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02 March 2017 I hope you have got a brief idea of reverse charge mechanism. Kindly refer Section 68 of Finance Act for detailed coverage.

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