Sevice taxa on reverse charge

Save Share

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

15 April 2014 Hi,
Does service tax reverse charge mechanism apply to state government owned power distribution company Ltd. Please suggest

Thanking you,

P V Ram

P V Ram (Expert)

15 April 2014 Power Distribution Companies are exempt from Service Tax as per clause (k) of section 66D - Negative List.

However, Reverse Charge mechanism will be applicable in case of services like Goods Transport Agency, Services of Advocates, services received from non taxable territory etc.

Thanks

P V Ram

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

15 April 2014 The company is receiving input service of manpower. In that case does the company liable to pay under reverse charge or not?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

25 July 2025 Here’s the clarity on **service tax reverse charge applicability for a State Government owned Power Distribution Company (DISCOM):**

---

### 1. **Is Power Distribution Company (DISCOM) exempt from service tax?**

* Yes, as per **Section 66D(k)** (Negative List), **services provided by a government or local authority by way of supplying power** are exempt from service tax.
* So, **power supply services themselves are exempt**.

---

### 2. **What about services received by the DISCOM like Manpower Supply?**

* Service tax on **input services** (like manpower supply) received by a DISCOM is **not exempt**.
* DISCOMs are required to pay service tax under **reverse charge mechanism (RCM)** on specified input services, including **manpower supply, security services, goods transport agency services**, etc.
* So, if the DISCOM receives manpower supply services from a contractor/agency, **it must pay service tax on reverse charge basis**.

---

### **Summary:**

| Service | Taxable for DISCOM? | Reverse Charge Applicability |
| --------------------------------- | ----------------------- | -------------------------------------- |
| Power Supply Service | Exempt (Negative List) | Not applicable |
| Manpower Supply Services Received | Taxable (input service) | Yes, DISCOM pays service tax under RCM |

---

### **Conclusion:**

* Your power distribution company does **not pay service tax on power supply** (it’s exempt).
* But for services like **manpower supply received**, it must **pay service tax under reverse charge**.

---

If you want, I can help you with references to the relevant notifications or draft a compliance checklist for such services. Would that be useful?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now