Service tax reverse charge w.e.f.1 6-2016

What is Reverse Charge ?

Prepared by : Rahul Pansari

Mob. - +91-9413546230

1

How it is different from Normal

Charge or Forward charge ?

NORMAL CHARGE (FORWARD CHARGE)

Prepared by : Rahul Pansari 2

Service

Receiver

Service

Provider

Value of Service 100

Service Tax @14% 14

Swachh Bharat Cess 0.5

Krishi Kalyan Cess 0.5

TOTAL 115

Government

INVOICE

100% REVERSE CHARGE MECANISM


Service

Receiver

Service

Provider


Service Tax @14% -

Swachh Bharat Cess -

Krishi Kalyan Cess -

TOTAL 100

INVOICE

Government

PARTIAL (50%) REVERSE CHARGE


Service

Receiver

Service

Provider


Service Tax @14% on

Rs. 507.5

Swachh Bharat Cess 0.25

Krishi Kalyan Cess 0.25

TOTAL 107.50

INVOICE

Government

SPECIFIED SERVICES UNDER REVERSE CHARGE

• There are total 14 type of Services which are specified

under Rule 2(1)(d) of Service Tax Rules, 1994.

• Out of these fourteen, 12 Services are covered under

Full Reverse charge & remaining 2 are covered under

Partial Reverse charge.

• A Quick View of the above 14 services are as follows :-


1.SERVICES PROVIDED BY INSURANCE AGENT TO INSURANCE COMPANY


Commission of

Rs.1,00,000/-

Provides Services

15% of Rs. 1,00,000/-

i.e. Rs. 15000/-

2. SERVICES PROVIDED BY RECOVERY AGENT TO BANKING CO. OR FINANCIAL INSTITUTION

OR A NBFC


Commission of

Rs.1,00,000/-

Provides Services

15% of Rs. 1,00,000/-

i.e. Rs. 15000/-

3. SERVICES PROVIDED BY SELLING AGENT OR MARKETING AGENT OF LOTTERY TICKETS IN RELATION TO LOTTERY IN

ANY MANNER TO A LOTTERY DISTRIBUTOR OR SELLING AGENT OF STATE GOVT UNDER THE PROVISIONS OF

LOTTERY (REGULATION) ACT, 1998.

8

Commissio

n of

1,00,000

Provides

Services

Under Reverse Charge:

15% of Rs. 1,00,000/-

i.e. Rs. 15000/-

Commissio

n of

1,00,000

plus S.Tax

of 15000

Provides

Services

Under Forward Charge:

15% of Rs. 1,00,000/-

i.e. Rs. 15000/-

4. SERVICES PROVIDED BY GOODS TRANSPORT AGENCY (GTA) IN RESPECT OF

TRANSPORTATION OF GOODS BY ROAD


Freight charges of

Rs.1,00,000/-

Provides Services

15% of

(Rs. 1,00,000-70000/-)

i.e. Rs. 4500/-

5. SERVICES PROVIDED BY WAY OF SPONSERSHIP


Sponsership Fee of

Rs.1,00,000/-

Provides

Sponsership Services

15% of

(Rs. 1,00,000/-)

i.e. Rs. 15,000/-

6. SERVICES PROVIDED BY AN ARBITRAL TRIBUNAL


Fee of Rs.1,00,000/-

Provides Services

15% of

(Rs. 1,00,000/-)

i.e. Rs. 15,000/-

7. SERVICES PROVIDED BY A FIRM OF ADVOCATES OR AN INDIVIDUAL ADVOCATE

OTHER THAN A SENIOR ADVOCATE BY WAY OF LEGAL SERVICE


Fee of Rs.1,00,000/-

Provides LEGAL

Services

15% of

(Rs. 1,00,000/-)

i.e. Rs. 15,000/-

8. SERVICES PROVIDED BY GOVERNMENT OR LOCAL

AUTHORITY, EXCLUDING :1. Renting of immovable property

2. By Deptt of Posts by way of Speed post, Express parcel post, life insurance

& agency services to other than Govt

3. In relation to Aircraft or Vessel inside or outside the precincts of a port or

airport.

4. Transportation of Goods or Passengers.


Fee of Rs.1,00,000/-

Provides Services

15% of

(Rs. 1,00,000/-)

i.e. Rs. 15,000/-

9. SERVICES PROVIDED BY WAY OF SUPPLY OF MANPOWER FOR ANY PURPOSE (OR SECURITY

SERVICES)


Charges of

Rs.1,00,000/-

Supply of

Manpower or

Security Services

15% of

(Rs. 1,00,000/-)

i.e. Rs. 15,000/-

10. TAXABLE SERVICES PROVIDED BY- ANY PERSON LOCATED IN NON TAXABLE TERRITORY

& RECEIVED BY- PERSON LOCATED IN TAXABLE TERRITORY [IMPORT OF SERVICE]


Charges of

Rs.1,00,000/-

TAXABLE

SERVICES

15% of

(Rs. 1,00,000/-)

i.e. Rs. 15,000/-

11. SERVICES PROVIDED BY- PERSON INVOLVING AN AGGREGATOR IN ANY MANNER


Payment of

Rs.1,00,000/-

Provides Services

15% of

(Rs. 1,00,000/-)

i.e. Rs. 15,000/-

12. SERVICES PROVIDED IN SERVICE PORTION IN EXECUTION OF WORKS CONTRACT


Payment of Rs.1,00,000/-

(Service Portion 40%)

Provides Services

7.5% =(15%*50%)

of Rs. 40000/-

i.e. Rs. 3,000/-

7.5% =(15%*50%)

of Rs. 40000/-

i.e. Rs. 3,000/-

13. SERVICES PROVIDED BY WAY OF RENTING OF A MOTOR VEHICLE DESIGNED TO CARRY PASSENGERS

ON ABATED VALUE TO ANY PERSON WHO IS NOT ENGAGED IN SIMILAR BUSINESS


Payment of Rs.1,00,000/-

Provides Services

of Renting of

Vehicle

15% of

(Rs. 1,00,000/-*40%)

i.e. Rs. 6,000/-

13. SERVICES 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 SIMILAR BUSINESS


Payment of

Rs.1,00,000/-

Provides Services

of Renting of

Vehicle

(15% of

Rs. 1,00,000/-) * 50%

i.e. Rs. 7,500/-

(15% of

Rs. 1,00,000/-) * 50%

i.e. Rs. 7,500/-

14. SERVICES PROVIDED BY A DIRECTOR OF A

COMPANY OR A BODY CORPORATE

TO THE SAID COMPANY OR BODY CORPORATE


Payment of

Rs.1,00,000/-

Provides Services

15% of

(Rs. 1,00,000/-)

i.e. Rs. 15,000/-


Different types of Services that are generally

provided by a Director

Service As a Director i.e. in the capacity of a Director for which he

receives remuneration by way of :

- Sitting Fees

- Bonus, Commission

- Share in Profits etc.

Service in Professional Capacity or any other capacity by way of :

- Renting of Immovable Property

- Professional Charges

- Work Contract Services

The Issue is whether Reverse Charge will be applicable on

ALL the services performed BY the Director or

only the services performed As a Director ?


There are different views on whether services provided “by” a director

can be read as services provided “as” a director.

Literal Interpretation : Since the nature of services should be

provided or not to be provided under this category is not mentioned in

the law. Hence on ALL the service provided “By” a Director of a

company, the service tax shall be paid by the company under Reverse

charge.

Logical Interpretation : The intent of the legislation can not be such,

to cover all the services. It is more logical to interpret that The

Company is liable to pay Service Tax under RCM only on those

services which are provided by the director in the capacity of

director.

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RAHUL PANSARI

Humble Regards !!

Char t e r ed Accoun t an t In M ak ing

Service tax reverse charge w.e.f.1 6-2016

Law

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