Reverse charge mechanism

Dear Samiran,

Service tax is charged on the basis of Place of service received. If service is received inside Taxable territory it will be taxable in the hands of Service Receiver irrespective of the fact that service provider is from outside Taxable territory. Place other than State of Jammu & Kashmir in India is considered as taxable territory due to article 370 of Indian constitution.   

In your case Reverse Charge mechanism is applicable. Your entity will have to deposit service tax by grossing up the value of service with service tax rate.(e.g.: service tax amount on value 1,00,000 will be 1,00,00*15/115)

Further point to be noted that Advertisement service received should not covered under negative list of service tax under section 66D.

Thanks and Regards

Shreesh Kumar

Hi Dear,

Thanks, But kindly let clear 1 thing :
Suppose : One of our Publisher 'A' invoiced us for $1000 for the month of July from Israel. and another of our Publisher "B" invoiced us for $1000 from Germany.  Now what amount would we have to pay them and what amount should pay to indian govt as Reverse Charge Machanism (ST). 

Also I want to know that when we could deduct that amount which is given by us as ST.

As I previously told you the amount of service tax is determined by grossing up the amount ofservice received with service tax rate therefore in your above given case you will have to firstly check that how much amount has been credited from Bank. Suppose the rate of exchange is Rs. 70 per dollar on that date follwing are the data:

Service Tax Amount: 2000*70*15/115= 18261

Service Amount: 2000*70*100/115= 121739

As far the deduction of service tax amount is concenred you may deduct with the mutual consent of you service provider. There is no legal right with you to deduct ST. However in this case you will have to deduct TDS.