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Payment of Service Tax under Reverse Charge July 8, 2013

Posted by Khurana Khurana & Associates LLP Chartered Accountants in Excise & Service Tax.
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Section 68(1) of the Finance Act, 1994 provides for payment of service tax by service provider. However section 68(2) empowers the Central Government to notify any service in Official Gazette and the service tax thereon shall be paid by such person as may be specified. All the provisions of this Act, 1994 shall apply to such persons as if they are the persons liable for paying service tax.

 

Notification No. 30/2013-ST dated 20-06-2012

In exercise of the said powers, the Central Government has issued notification No. 30/2012-ST, dated 20-06-2012 specifying the persons who are liable to pay service tax and to the extent to which the liability is payable by the service provider.

 

Point of Taxation for Service Receivers liable to pay tax under Reverse Charge

 

Rule 7 prescribes the point of taxation in case of the persons required to pay tax as recipients under the rules made in this regard in respect of services notified under section 68(2) of the Act:-

With effect from 01-07-2012, Notification No. 30/2012-ST, dated 20-06-2012, provides the extent of service tax payable by certain service receivers who receive specified services.

The description of service provided in notification in the table and the extent of payment to be made by service receiver are as follows:-

 

S.No.

Description of a Service

% of Service tax payable by Service Provider

% of Service tax payable by Service Recipient

1.

Services provided by an Insurance agent to any person carrying on Insurance business

NIL

100%

2.

Services provided by a goods transport agency in respect of transportation of goods by road

NIL

100%

3.

Sponsorship Services provided to anybody corporate or partnership firm located in the taxable territory.

NIL

100%

4.

Services provided by an Arbitral tribunal to any business entity located in the taxable territory.

NIL

100%

5.

Services provided by an Individual Advocate or firm of Advocates by way of legal services to any business entity located in the taxable territory.

NIL

100%

6.

Support services by Government or local authority (excluding renting of immovable property and certain other specified services)

NIL

100%

7.

Renting of passenger motor vehicles*-

With abatement-

Without abatement

Nil

60%

100%

40%

8.

Supply of manpower for any service*

25%

75%

9.

Works Contract service*

50%

50%

10.

Any taxable service where the Service provider is located in a non-taxable territory and service recipient located in a taxable territory

NIL

100%

* In case where the service provider is a non-corporate entity and the service recipient is a corporate entity.

The point of taxation prescribed for the above mentioned service receivers is the date on which payment is made to the service providers. However the proviso to Rule 7 provides that in case where such payment is not made within a period of 6 months of the date of invoice, the point of taxation shall be determined as if rule 7 ‘does not exist’.

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