What is Reverse Charge Mechanism:
Service tax is generally paid by the service provider on taxable value of services which is generally in turn collected from service receiver.example: Amitabh is providing consultant services to XYZ Ltd then in this case Amitabh is service provider who will raise an Invoice on XYZ Ltd & collect the service tax at applicable rate of 12.36% (12%+2&{ed cess}+1%{S& H Ed cess}.Amitabh has to deposit this amount to the revenue as per the time limit prescribed under the law.
Here in above example we can conclude that Service tax is payable by the Service Provider.
But.......What is Reverse Charge...As the name suggest,Reverse means "Opposite" which one may think in the manner that in this mechanism service tax is payable by service receiver instead of service provider.Yes,You all are right,basically in this mechanism,the liablity to pay service tax is on service receiver.However in certain cases govt has prescribed a certain percentages according to which some part of service tax is payable by service receiver & the rest is the liablity of service provider only.
Logic of Finance Minister behind this provision :The logic behind such a move on the part of the policy maker was to curb tax evasion, which was prevalent in these sectors due to the reason that these are unorganised sectors as most of the service providers are individuals and small service firms. On the other hand, this a punitive provision for body corporate in keeping with the amount of administrative and accounting hassles involved in the process.
Payment of Service tax under Reverse Charge:
Payment of service tax liablity under reverse charge is equivalent to that of payment of normal service tax.Hence the Rule-6 of Service tax Rules is applicable.
Type of Assessee Periodicity Due Date
Individual/Prop.Firm/Partnership firm Quarterly 5th of the month immed. following the qtr
All other Assessee Monthly 5th of the month immediately foll. the month
Pl note in case of online payment of service tax,5th will be replaced by 6th day of the month.
Reverse Charge is prescribed through Notification no 30/2012.
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