Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, November 5, 2012

Rates of Service Tax to be Deposited by Service Receiver or Service Provider in Case of Various Services Covered under Reverse Charge Mechanism


Description
of Service


Explanation
ST  rate applicable to Service Recipient under Reverse Charge
ST rate to be charged by Service Provider in invoice (non-
company)
ST rate to be charged by Service Provider (company)
1
Services of an Insurance Agent to any person carrying on insurance business w.e.f. 01.07.2012.
Covered: Payment to insurance agents by insurance companies for their services. Service Recipient (insurance company)’s liability is 100%.

This was in effect even before Finance Act, 2012.
12.36%
                    -
                    -
2
Services of Goods Transport Agency in respect of transportation of goods by road w.e.f. 01.07.2012.

This was in effect even before Finance Act, 2012.
Covered: Transportation of goods by road through a GTA which issues a consignment note, by whatever name called. Person who pays or is liable to pay freight shall be treated as the person who receives the service.
Excluded:
-  Courier, express cargo, carriage of certain food/drink items, freight upto Rs. 750/- per consignee per carriage and upto Rs. 1500/- per goods carriage. 
-  Service provided by truck owner directly and not through GTA to end user is covered by the negative list entry and is not liable to service tax.
Service Recipient’s liability is 100%.

Applicability: The reverse charge is applicable only when consignor or consignee is a factory registered under the Factories Act, registered society, co-operative society, any dealer registered under the Central Excise Act, any body corporate or any partnership firm.

Non availability of Cenvat Credit: Service Tax payable is 25% of the value if Cenvat credit has not been availed by the Service Provider. Hence, it is necessary to obtain certificate from the Service Provider (GTA) that he has not availed any Cenvat credit. Otherwise, service tax will be payable on 100% of the value.
3.09%
                    -
                    -
3
Services by way of Sponsorship w.e.f. 01.07.2012.
This was in effect even before Finance Act, 2012.
Covered: All sponsorships.
Excluded: Advertisement / business promotion, certain sports related sponsorships. 
Service Recipient’s liability is 100%.
Note: If such body corporate or partnership firm is not located in taxable territory, the service provider (i.e. person receiving the sponsorship money) will be liable to pay the service tax.

Applicability: Service Receiver should be a body corporate or partnership firm.
12.36%
                    -
                    -
4
Services of an Arbitral Tribunal w.e.f. 01.07.2012.
Covered: Any payment for any service. 
Service Recipient’s liability is 100%.

Applicability: The Service Provider is the Arbitral Tribunal and the Service Receiver is a business entity having turnover over Rs. 10 lakhs in the preceding financial year.
12.36%
                    -
                    -
5
Services of Advocates (individual/firm) w.e.f. 01.07.2012.
Covered: Advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.
Service Recipient’s liability is 100%.

Applicability: Applicable when the Service Receiver is a business entity having turnover over Rs. 10 lakhs in the preceding financial year.
12.36%
                    -
                    -
6
Services of Directors of a Company w.e.f. 07.08.2012.
Covered: Any payment to non-executive directors for any service. E.g. sitting fee, reimbursements.
Excluded: Executive directors in employment. If Company itself arranges lodging, boarding, travelling, etc. for the non-executive directors and the bill is raised in the name of the Company.
However, it may be covered under any other category, e.g. car hire charges.
Service Recipient’s liability is 100%.
12.36%
                    -
                    -
7
Support Services by Government or Local Authority w.e.f. 01.07.2012.
Covered: “Support services” means infrastructural, operational, administrative, logistic, marketing, or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others, and shall include advertisement and promotion, construction or works contract, renting of immovable property, security (police protection), testing and analysis.
Excluded: Renting of immovable property, services of Department of Posts by way of speed post, express parcel post, life insurance and agency services, services in relation to an aircraft or a vessel, transport of goods or passengers, municipal, public convenience and other public services like water supply, sanitation, and solid waste management.
Service recipient’s liability is 100%.
Examples of Support Services by Local Authority / Govt./ Development Board: Marketing support by Silk Board, Coir Board, Coffee Boards.

Applicability: Where Service Receiver is any business entity.
12.36%
                   -
                    -
8
Import of service w.e.f. 01.07.2012. This was in effect even before Finance Act, 2012.
Covered: Any payment for import of taxable services from any place outside the taxable territory.
Service Recipient’s liability is 100%.
It is to be noted that Service Tax will be calculated on gross value including TDS on the contract value.

Applicability: Any taxable service provided by any service provider to any service receiver.

It is to be noted that the state of Jammu & Kashmir does not fall in the taxable territory therefore; services provided by a person located in J&K to a person located in the rest of India shall also be liable under reverse charge. Location of service provider and service receiver shall be determined as per Place of Provision of Services Rules, 2012 which have not been notified yet.
12.36%
                    -
                    -
9
(a) Renting of a motor vehicle designed to carry passengers on abated value w.e.f. 01.07.2012.
If service provider is not availing input credit, 9(a) is applicable; otherwise 9(b) is applicable.
Covered: Hiring passenger cars, cabs, buses etc.
Excluded: Radio taxi, metered cab, three wheeler, auto rickshaw, stage carrier, contract carriage and packaged tour, public transport not predominantly for tourism purpose e.g. Meru cabs, bus having contract permit hired for transportation of employees.

Applicability: Where Service Provider is Individual/ Proprietorship/ Partnership firm/ HUF and Service Receiver is a business entity registered as a body corporate in taxable region.
Also, the Service Receiver should not be in the same line of business as the Service Provider.

Note: If motor vehicle is taken on hire (operating lease) without driver, it is ‘transfer of right to goods’. Then it is deemed sale of goods and Vat will apply – not service tax.
In case Service Provider does not avail input credit.
4.944%
                    -
4.944%
(to be wholly paid by Service Provider instead of Service Receiver in case Provider is a company)
(b) Renting of a motor vehicle designed to carry passengers on non - abated value w.e.f. 01.07.2012.
In case Service Provider avails input credit.
4.944%
7.416%
12.36%
(to be wholly paid by Service Provider instead of Service Receiver in case Provider is a company)
10
Supply of manpower for any purpose w.e.f. 01.07.2012 or security services w.e.f. 07.08.2012.
Covered: Payment for services of the staff seconded/ deputed with the company under an arrangement where the staff remains on the payroll of the original employer only, payment for services of staff (not on payroll of the recipient of service) supplied by an agent/person under an arrangement where it is placed operationally under the superintendence or control of the recipient of service (e.g. housekeeping staff supplied by manpower agency), all security/detective services.
Excluded: Joint employment, outsourcing the activity/service itself e.g. outsourcing house-keeping work to an outside agency instead of getting the manpower supplied by an agent for house-keeping work, Recruitment / placement agency service.
Service Recipient’s liability is 75% and Service Provider’s liability is 25%.

Applicability: Where Service Provider is Individual/ Proprietorship/ Partnership firm/ HUF and Service Receiver is a Company registered under the Companies Act, 1956 or a business entity registered as a body corporate in taxable region.
9.27%
3.09%
12.36%
(to be wholly paid by Service Provider instead of Service Receiver in case Provider is a company)
11
(a) Works contract w.e.f. 01.07.2012.
Covered: Any contract involving the use of labour plus material on which VAT is leviable under any schedule of VAT Act on any material used in execution of works contract and such contract is for any new construction; any addition and alteration to abandoned or damaged structures on land that are required to make them workable; any erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise. 
Service Recipient’s liability is 50% and Service Provider’s liability is 50%.

Applicability: Where Service Provider is Individual/ Proprietorship/ Partnership firm/ HUF and Service Receiver is a Company registered under the Companies Act, 1956 or a business entity registered as a body corporate in taxable region.
2.472%
2.472%
4.944%
(to be wholly paid by Service Provider instead of Service Receiver in case Provider is a company)
(b)Works contract w.e.f. 01.07.2012.
Covered: Any contract involving the use of labour plus material on which VAT is leviable under any schedule of VAT Act on any material used in execution of works contract  and such contract is for maintenance or repair or reconditioning or restoration or servicing of any goods e.g. AMC of movable items/ office equipments. Service Recipient’s liability is 50% and Service Provider’s liability is 50%.

Applicability: Where Service Provider is Individual/ Proprietorship/ Partnership firm/ HUF and Service Receiver is a Company registered under the Companies Act, 1956 or a business entity registered as a body corporate in taxable region.
4.326%
4.326%
8.652%
(to be wholly paid by Service Provider instead of Service Receiver in case Provider is a company)
(c) Works contract w.e.f. 01.07.2012.
Covered: Any contract involving the use of labour plus material on which VAT is leviable under any schedule of VAT Act on any material used in execution of works contract and such contract is other than as mentioned under 11(a) & 11(b) or is for maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property, e.g. interior and furnishing work, electrical work of items other than movable ones.
Service Recipient’s liability is 50% and Service Provider’s liability is 50%.

Applicability: Where Service Provider is Individual/ Proprietorship/ Partnership firm/ HUF and Service Receiver is a Company registered under the Companies Act, 1956 or a business entity registered as a body corporate in taxable region.
3.708%
3.708%
7.416%
(to be wholly paid by Service Provider instead of Service Receiver in case Provider is a company)
Works Contract Note:
Independent valuation of the works contract service by service receiver: As per Explanation-II to Notification 30/2012-ST, dated 20.06.2012, in works contract services, where both service provider and service recipient are the persons liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent of valuation method adopted by the provider of service.

Practical difficulty: If the receiver of works contract service (contractee) wants to pay service tax on actual value of services and the service provider/contractor chooses to pay under alternate method, then a practical difficulty will arise in the valuation of service by the service receiver.
In most of the cases, contractee would be depending upon the contractor’s Running Account bills or accounting maintained by contractor for determining the amount of material and service/labour element involved in the contract.
If the contractor is paying service tax under alternate method then he may not bother to find out the actual services/labour element in the works contract as he has to calculate service portion at a fixed percentage of total amount under alternate method. In such a case, if the contractee wants to pay service tax on actual value of services, it would be very difficult for him to find out the actual value of labour/service element involved in works contract in the absence of proper accounting by contractor.
Similarly small contractors who are covered under SSI exemption i.e. having turnover less than Rs. 10 lakh may not be maintaining regular books of accounts under any law i.e. under Income Tax (Due to being covered u/s 44AD) or VAT laws (opting for composite scheme). In such a case, it would again be difficult for the service receiver to pay service tax under actual scheme.


Notes:
Business entity” means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. Thus, Government and charitable organisations are not ‘business entity’.
Body Corporate” – Company, LLP, Cooperative Society is Body Corporate – Firm, HUF, Trust is not ‘Body Corporate’ [Society registered under Societies Act is legally not ‘body corporate’].
Supply of manpower” means supply of manpower, temporarily or otherwise, to another person to work under his superintendence or control.

2 comments:

  1. These are the format of service tax for import or export of the transportation, It is good to have the details of shipping rates in business. Get the offers of Free Truckload Quotes service for your business on truck quote.

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  2. Good information you shared. Since payroll is very common in companies and it need to maintain properly by experts with payroll management software.

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