SEMINAR ON “ENABLING
SERVICE TAX PRACTICE”
ORGANISED BYBARODA BRANCH OF
WIRC OF ICAI
Service( Meaning defined )- Sec 65B
Any
activity
For
consideration
Carried out by a
person for
another
Also, includes
declared
service.
• Negative list is not chargeable to tax at all
as they are excluded from section66B.
NEGATIVE LIST
• Negative list is a part of law, can be
amended only in budget with parliaments
approval.
• Services in the exemption list is chargeable
to tax but are expressly exempted.
EXEMPTION
• Exemptions can be withdrawn by the
ministry by issuing relevant notifications.
NEGATIVE LIST
• Service by Government or a local authority
• Excluding
– speed post, express parcel post, life insurance and agency
services provided to a person other than Government
– Services in relation to a vessel or an aircraft inside or outside
the precincts of a port or an airport;
– Transport of goods and/or passengers;
– Support services provided to business entities
SUPPORT SERVICES
• Section 65B(49) -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
services by outsourcing from others for any reason whatsoever and
includes advertisement and promotion, construction
or works contract, renting of immovable
property, security, testing and analysis”
NEGATIVE LIST
• Services by RBI
• Any service that is provided by a diplomatic mission of any
country located in India
• Services relating to agriculture or agricultural produce
NEGATIVE LIST
• Trading of Goods
– includes future contract of commodities
• Process amounting to manufacture or production of goods
– "process amounting to manufacture or production of goods" means a
process on which duties of excise are leviable under section 3 of the
Central Excise Act, 1944 (1 of 1944) or any process amounting to
manufacture of alcoholic liquors for human consumption, opium,
Indian hemp and other narcotic drugs and narcotics on which duties of
excise are leviable under any State Act for the time being in force;
NEGATIVE LIST
• Selling of space or time slots for advertisements other than
advertisements broadcast by radio or television
• Service by way of access to a road or a bridge
on payment of toll charges
• Betting, gambling or lottery
- “Betting or Gambling” defined in Section 65B(15)
• Admission to entertainment events or
access to amusement facilities
NEGATIVE LIST
• Transmission or distribution of electricity by electricity transmission
or distribution utility

Transmission or Distribution of Electricity by following entities
would cover within Negative List Services –
•
Central Electricity Authority;
•
State Electricity Board;
•
Central Transmission Utility;
•
State Transmission Utility;
•
a distribution or transmission licensee licensed under the said
Act.

Builder, Developer or Housing Society charges separately for
distribution of electricity with a residential complex, would
not cover under this exclusion
NEGATIVE LIST
• Specified Education Service
– pre-school education and education up to higher secondary
school or equivalent
– education as a part of a curriculum for obtaining a
qualification recognized by any law for the time being in force
– education as a part of an approved vocational education
course.
NEGATIVE LIST
• Renting of Residential Dwelling for use as residence

Residential dwelling has not been defined in the Act and hence
it should be interpreted in common parlance and it means any
residential accommodation but does not include hotel, inn,
guest house, camp-site, lodge etc meant for temporary stay.
NEGATIVE LIST
• Financial Services
– services by way of extending loans, advances to the extent
consideration is represented by interest or discount
– inter-bank sale or purchase of foreign currency amongst banks
or authorized dealers or amongst banks and such dealers.
NEGATIVE LIST
Transportation of Passengers
• a stage carriage,
• railways in a class other than first class or an air-conditioned coach
• metro, monorail or tramway
• inland waterways;
• public transport, other than predominantly for tourism purpose, in
a vessel between places located in India; and
• metered cabs, radio taxis or auto rickshaws.
NEGATIVE LIST
Services of Transportation of Goods

Transportation of goods by road except GTA and Courier
Service;

Transportation of goods by an air craft or vessel from a place
outside India to the customs station of clearance in India; or

Transportation of goods by inland waterways
NEGATIVE LIST
• Funeral, burial, crematorium or mortuary services
including transportation of the deceased
Mega Exemptions
Notification 25/2012 –dated
20.06.2013 (as amended)
LIST OF SERVICES UNDER MEGA
EXEMPTION & NEGATIVE LIST
SERVICES TO INTERNATIONAL & DOMESTIC ORGANISATION
ME-1: Services provided to United Nations or
a specified international organization
(As declared by Central Government in
United Nations Privileges & Immunities
Act 1947).
ME-25 : Services provided to the government or local authority by way ofa) Carrying out any activity in relation to any function ordinarily
entrusted to a municipality in relation to water supply, public health,
sanitation conservancy, solid waste management or slum
improvement & upgradation;
OR
b) Repair and maintenance of a vessel
LIST OF SERVICES UNDER MEGA
EXEMPTION & NEGATIVE LIST
ME-34: Services received from a service provider located in a non-taxable territory
by(a) The government, a local authority or an individual in relation to any
purpose other than commerce, industry or any other business or
profession;
(b) An entity registered under Section 12AA of Income Tax Act,1961
(c) a person located in a non-taxable territory.
ME-36: Services by Employees state Insurance Corporation to persons governed
under the Employees Insurance Act 1948
ME-39: Services by a governmental authority by way
of any activity in relation to any function entrusted to
a municipality under article 243W of the constitution.
NOT FOR PROFIT ORGANISATIONS
ME-4: Services by an entity registered under section 12AA of Income Tax Act
1961 by way of charitable activities.
 Charitable activities are defined in the notification. It means activity
relating to –
(i)
Public health by way of –
(a) care or counseling of
 terminally ill persons; or
 persons with severe physical or mental disability;
 persons afflicted with HIV or AIDS ; or
 persons addicted to dependence
(b) Public awareness of preventive health, family planning or
preservation of HIV infection;
(ii) Advancement of religion or spirituality;
NOT FOR PROFIT ORGANISATIONS
`
(iii) Advancement of educational programs or skills development
relating to –
 abandoned, orphaned or homeless children;
 physically or mentally abused and traumatized persons;
 prisoners;
 persons over the age of 65 years residing in rural area
or
(iv) Preservation of environmental including
watershed, forests and wildlife
NOT FOR PROFIT ORGANISATIONS
ME-5: Service by a person by way of(a) Renting of precincts of a religious place meant for general public or
(b)Conduct of any religious ceremony
ME-28: Service by an unincorporated body or a non-profit entity registered
under any law for the time being in force to its own members by way of
reimbursement of charges or share of contribution
(a) As a trade union
(b) For the provision of exempt services by the entity to third persons: or
(c) Up to an amount of Rs 5000 per month per member for sourcing of
goods or services from a third person for the common use of its members
in a housing society or a residential complex
NOT FOR PROFIT ORGANISATIONS
ME-34: Service received from a service provider located in a non-taxable
territory by(a) Government, a local authority, a governmental authority or an
individual in relation to any purpose other than commerce,
industry or any other business or profession;
(b) an entity registered under section 12AA of the Income tax Act,
1961 (43 of 1961) for the purposes of providing charitable
activities; or
(c) a person located in a non-taxable territory;
EDUCATION SERVICES
ME-8: Services by way of training or coaching in recreational activities
relating to arts, culture or sports;
ME-9: Provided to an educational institution in respect of education
exempted by way of
• Auxiliary educational services; or
• Renting of immovable property
ME-9A : Any service provided by(i) the National Skill Development Corporation set up by the GOI;
(ii) a sector Skill Council approved by the Sector Skill Corporation
or National Skill Corporation;
(iii) an assessment agency approved by the Sector Skill Council or
the National Skill Development Corporation;
EDUCATION SERVICES
(iv) a training partner approved by the National Skill
Development Corporation or the Sector Skill Council
In relation to(a) the National Skill Development Programme implemented by the
National Skill Development Corporation; or
(b) a vocational skill development course under the National Skill
Certificate and Monetary Reward Scheme; or
(c) Any other scheme implemented by the National Skill
Development Corporation.
EDUCATION SERVICES
NL-4: Services by way of Pre-school education and education up to higher secondary
school or equivalent
 Education as apart of a curriculum for obtaining a
qualification recognised by law
 Education as a part of an approved vocational education
course.
EDUCATION SERVICES
 Auxiliary Education Services means –
 in connection with service provided by educational institution
 Imparting any skill, knowledge, education; or
 Development of course content; or
 Enhancement activity for students or faculty
 In connection with service provided to
educational institution
 Services relating to admission to such institution;
 Conduct of examination;
 Catering for the students under any mid-day meals scheme;
 Transportation of students, faculty or staff
HEALTH CARE
ME-2: Health care services by a clinical establishment, an authorized medical
practitioner or Para-medics;
 Health care services is defined and it means services by way of  diagnosis; or
 treatment; or
 care for illness, injury, deformity, abnormality or pregnancy;
 service to be provided in any recognized system of medicine;
 includes ambulance services.
ME-3: Services by a veterinary clinic in relation to health care of animals or
birds;
ME-7: Services by way of technical testing or analysis of newly developed
drugs, including vaccines and herbal remedies, on human participants
by a clinical research organization approved to conduct clinical trials
by the Drug Controller General of India;
 Health care services does not include hair transplant or cosmetic or
plastic surgery.
CONSTRUCTION, REAL ESTATES
& WORKS CONTRACT SERVICES
ME-12: Services provided to the government or local authority or a
government authority by way of construction, erection,
commissioning, installation, completion, fitting out, repair,
maintenance, renovation, or alteration ofA civil structure or any other original works meant predominantly for
other than commerce, industry, or any other business or profession;
A historical monument, archeological site or remains of national
importance, archeological excavation, or antiquity specified under
ancient monuments and Archaeological Sites and Remains Act 1958;
A structure meant predominantly for use as an educational, a clinical,
an art or culture establishment;
Canal, dam or other irrigation works;
Pipeline, conduit or plant for drinking water supply, water treatment,
sewerage treatment or disposal; or
A residential complex predominantly meant for self use or the use of
their employees or other persons specified in the Explanation 1 to
clause 44 of section 65B of the Finance Act;
CONSTRUCTION, REAL ESTATES &
WORKS CONTRACT SERVICES
ME-13: Services provided by way of construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance, renovation,
or alteration of(a) a road, bridge, tunnel, or terminal for road transportation for use by
general public;
(b) a civil structure or any other original works pertaining to a scheme
under
Jawaharlal Nehru National Urban Renewal Mission or
Rajiv Awaas Yojana;
(c) a building owned by an entity registered under section 12 AA of the
Income tax Act, 1961(43 of 1961) and meant predominantly for
religious use by general public;
(d) a pollution control or effluent treatment plant, except located as a
part of a factory; or
(e) a structure meant for funeral, burial or cremation of deceased;
CONSTRUCTION, REAL ESTATES &
WORKS CONTRACT SERVICES
ME-14: Services by way of construction, erection, commissioning, or
installation of original works pertaining to;
 Airport or railways, including mono rail or metro;
 Single residential unit otherwise than as a part of a residential complex;
 Low cost houses up to a carpet area of 60 square meters per house in a
housing project approved by competent authority empowered under the
`Scheme of Affordable housing in Partnership’ framed by the Ministry of
Housing and Urban Poverty Alleviation Government of India;
 Post harvest storage infrastructure for agricultural produce including cold
storages for such purposes or
 Mechanised food grain handling system, machinery or equipment for
units processing agricultural produce as food stuff excluding alcoholic
beverages;
SPORTS & GAMES
ME-10: Services provided to a recognised sports body by-
 An individual as a player, referee, umpire, coach or team manager for
participation in a sporting event organised by a recognised sport body;
 another recognised sports body;
ME-11: Services by way of sponsorship of tournaments or championship
organised By a national sports federation, or its affiliated federations, where the
participating teams or individuals represent any district, state or zone;
 By Association of Indian Universities, Inter-university sports board,
School games federation of India, All India Sports council for the Deaf,
Paralympic committee of India, Special Olympics Bharat;
 By Central Civil Services cultural and Sports Board;
 As part of national games by Indian Olympic Association or
 Under Panchayat Yuva Kreeda Aur Khel Abhiyan (PYKKA) Scheme.
ENTERTAINMENT & MEDIA
ME-15: Temporary transfer or permitting the use or enjoyment of a copyright-
a) covered under clause (a) or (b) of sub section (1) of section 13 of the
Indian Copyright act, 1957 relating to original literary, dramatic
musical, artistic works or
b) cinematograph films for exhibition in a cinema hall or cinema theatre;
ME-16: Services by a performing artist in folk or classical art forms of music,
dance, theatre, excluding services provided by such artist as a brand
ambassador;
ME-17: Services by way of collecting or providing news by an independent
journalist, press Trust of India or united News of India;
TRAVELLING AND TOURISM
ME-22: Services by way of giving on hire(a) to a state transport undertaking, a motor vehicle meant to carry more
than twelve passengers; or
(b) to a goods transport agency, a means of transportation of goods;
ME-23: Transport of passengers, with or without accompanied belongings by Air embarking or terminating in an airport located in the state of Arunachal
Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or at
Baghdogra located in West Bengal; or
 A contract carriage for the transportation of passengers,
excluding tourism, conducted tour, charter or hire;
 Ropeway, cable car or aerial tramway;
HOTEL RESTURANT AND FOOD SERVICES
ME-18: Services by way of renting of a hotel, inn,
guest house, club, campsite or other
commercial places meant for residential
or lodging purposes, having declared tariff
of a unit of accommodation below Rs 1000 per day or equivalent;
 declared tariff” includes charges for all amenities provided in the unit of
accommodation (given on rent for stay) like furniture, air-conditioner,
refrigerators or any other amenities, but without excluding any discount
offered on the published charges for such unit.
 Tax will be liable to be paid on the amount actually charged i.e. declared
tariff minus any discount offered. [Circular No. 139/8/11 dated 10-05-2011]
HOTEL RESTURANT AND FOOD SERVICES
• ME-19: Services provided in relation to serving of food or beverages
by a restaurant, eating joint or a mess, other than those having the
facility of air-conditioning or central air-heating in any part of the
establishment, at any time during the year.
• ME-19A : Services provided in relation to serving of food or
beverages by a canteen maintained in a factory covered under the
Factories Act, 1948 having the facility of air-conditioning or central
air-heating in any part of the establishment, at any time during the
year.
TRANSPORT AND LOGISTICS
ME-20:Services by way of transportation by rail or a vessel from one port in
India to another of the following goods Relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishaps
 Defense or military equipments;
 Newspaper or magazines registered with registrar of Newspapers;
 Railway Equipments or materials;
 Agricultural produce;
 Foodstuffs including flours, tea, coffee, jaggery, sugar, milk products, salt
& edible oil, excluding alcoholics beverages; or
 Chemical fertilizers & oilcakes
TRANSPORT AND LOGISTICS
ME-21: Services provided by a goods transport agency by way of
transportation in a goods carriage of agricultural produce;
 Goods where gross amount charged for the transportation of goods on a
consignment transported in a single goods carriage does not exceed Rs1500
or
 Goods where gross amount charged for transportation of all such goods for
a single consignee in the goods carriage doesn’t exceed Rs 750;
 foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt
and edible oil, excluding alcoholic beverages;
 chemical fertilizer and oilcakes;
 newspaper or magazines registered with the Registrar of Newspapers;
 relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap; or
defence or military equipments;”
BUSINESS & MARKETING:
ME-6: Services Provided byAn arbitral tribunal to(a) Any person other than a business entity; or
(b) A business entity with a turnover up to Rs 10 lacs in the preceding
financial year;
 An individual as an advocate or a partnership firm of advocates by way of
legal services to(a) An advocate or partnership firm of advocates providing legal services
any person other than a business entity; or
(b) A business entity with a turnover up to Rs10 lacs in the preceding
financial year; or
(c) A person represented on an arbitral tribunal to an arbitral tribunal;1
BUSINESS & MARKETING:
ME 29: Services by the following persons in respective capacities A sub broker or an authorised person to a stock broker
 An authorised person to a member of a commodity exchange
 A mutual fund agent to a mutual fund or asset management company;
 Distributor to a mutual fund or asset management Company;
 A selling or marketing agent of lottery tickets to a distribution or a selling
agent;
 A selling agent or a distributor of SIM cards or recharge coupon vouchers;
or
 Business facilitator or a business correspondent to a banking company or
an insurance company in a rural area;
 Sub contractor providing services by way of works contract to another
contractor providing works contract services which are exempt;
ME-31: Services by an organiser to any person in respect of a business
exhibition held outside India;
ME-37: Services by way of transfer of a going concern, as a whole or an
independent art thereof;
JOB WORK
NL-15: Any process amounting to manufacture or production of goods.
ME-30: Carrying out an intermediate production process as job work in relation
to Agriculture, printing or textile processing;
 Cut & polished diamonds & gemstones; or plain & studded jewellery of
gold & other precious metals, falling under chapter 71 of Central Excise
Tariff Act 1985
 Any goods on which appropriate duty is payable by the principal
manufacturer; or
 Process of electroplating, Zinc plating, anodizing, heat treatment,
powder coating, painting including spray painting or auto black, during
the course of manufacture of parts of cycles or sewing machines up to an
aggregate value of taxable service of the specified processes of
Rs.1,50,00,000 in a financial year subject to the condition that such
aggregate value had not exceeded Rs.1,50,00,000 during the preceding
financial year;
BANKING, FINANCIAL & INSURANCE
ME-26: Services of general insurance business provided under Specified
Schemes.
ME- 26A :Services of Life Insurance business provided under following
schemes:
(a) Janashree Bima Yojana (JBY); or
(b) Aam Aadmi Bima Yojana (AABY)
This exemption has been inserted vide N. No. 49/2012 – dated 24-12-2012
w.e.f. 24-12-2012
MISCELLANEOUS
ME-27: Services provided by an incubatee up to a total business turnover of Rs
50,00,000 in a financial year subject to the following conditions, namely
 The total business turnover had not exceeded Rs 50,00,000 rupees
during the preceding financial year; and
 A period of 3 years has not lapsed from the date of entering into an
agreement as an incubatee;
ME-32: Service by way of making telephone calls from Department run public telephones
 Guaranteed public telephones operating only for local calls; or
 Free telephones at airport and hospitals where no bills are being issued;
ME-33: Services by way of slaughtering of animals;
ME-35: Services of public libraries by way of books, publications
or any other knowledge-enhancing content or material;
ME-38: Services of way of public conveniences such as provision of facilities of
bathroom, washrooms, lavatories, urinal or toilets;
LIST OF GENERAL EXEMPTIONS
OFFICIAL USE OF FOREIGN DIPLOMATIC MISSION
Taxable services provided for the official use of a foreign diplomatic mission
or consular post in India, or for personal use or for the use of the family
members of diplomatic agents or career consular officers therein
PROPERTY PAID ON IMMOVABLE PROPERTY
Taxable service of renting of an immovable property, from so much of the
service tax leviable thereon under section 66B of the said Finance act , as is
in excess of the service tax calculated on a value which is equivalent to the
gross amount charged for renting of such immovable property less taxes on
such property, namely property tax levied & collected by local bodies.
IMPORT OF TECHNOLOGY
Service involving import of technology, from so much of service tax leviable
as is equivalent to the amount of cess payable on the said import of
technology under the provisions of section 3 of the Research & development
Cess Act 1986, subject to certain conditions.
10th December, 2013
SEMINAR ON “ENABLING
SERVICE TAX PRACTICE”
ORGANISED BYBARODA BRANCH OF
WIRC OF ICAI
CONTENTS
 INTRODUCTION
 REVERSE CHARGE MECHANISM
 LEGAL BACKGROUND
 SERVICES COVERED UNDER REVERSE CHARGE
(NOT. 30/2012 – ST)
 PROPORTIONS OF SERVICE TAX PAYABLE BY SERVICE
PROVIDER & SERVICE RECIPIENT
 CERTAIN ISSUES IN RELATION TO REVERSE CHARGE
MECHANISM
 CONCLUSION
Change from Positive to Negative!!
 Hitherto, India was following “selective approach” (positive list) for
levy of service tax thereby only selected services were made liable to
Service Tax.
 W.e.f. 1st July, 2012, Comprehensive approach of levy of service tax
is introduced, whereby all services are made taxable except those
mentioned in the negative list and specifically exempted (negative list
approach).
 Before the introduction of comprehensive approach of taxation w.e.f
1st July,2012,service tax was payable by the recipient of service only
in respect of certain notified services which were specified by the
Central Government in Rule 2(1)(d) of the Service Tax Rules, 1994 , in
view of powers given u/s 68(2) of the Finance Act,1994.
Forward to Reverse Charge
Mechanism!!
• General Principle
– Service Provider to collect from Service Recipient and pay
tax to the Government
– Service Recipient is not accountable to the Government
directly
• Reverse Charge Mechanism
– Service Recipient called upon to directly pay tax to the
Government (either on part of value of service or full value
of service)
ONUS TO DISCHARGE
In specified cases, the
liability to discharge
service is tax is vested with
the recipient of services
Prima facie, liability to
discharge is that of the
service provider
Service
provider
Recipient
Service – AN
ACTIVITY
Division of the responsibility between the
provider and recipient of services
Legal Background
In terms of section 68(1) of the Act, liability to pay service tax falls on the service
provider.
Overriding the aforesaid position, section 68(2) of the Act empowers the Central
Government to notify such services on which such person, as may be prescribed,
shall be liable to pay service tax .
By virtue of this section, a person other than the service provider can be made
liable to pay service tax and he shall be deemed as if he is the person liable for
paying the service tax on such service and all other provisions of this Act shall
apply accordingly.
Finance Act, 2012 inserts a proviso to section 68(2) of the Act, wherein it is
provided that the service provider and the service receiver can jointly be made
liable to pay service tax on the same transaction.
Reverse Charge : Under the new
“Negative List” w.e.f.1st July,
2012

Reverse charge as it existed under the erstwhile selective levy of
services till 30.06.2012 continues under the new system of taxation
also both in case of specified services provided in India and in case
of services provided from outside India.
 Section 68(2) of the Act is the applicable provision whereby reverse
charge i.e. liability to pay full service tax[Full Reverse Charge] is
fastened on the recipient of a service in certain situations and service
provider is not liable to pay service tax .

Moreover, Concept of Partial Reverse Charge is introduced wherein
liability to pay service tax is divided between Service Provider and
Service Recipient instead of casting liability on one of them.
SERVICES COVERED UNDER
REVERSE CHARGE
For the period post 1st July, 2012; Central Government vide notification
No 30/2012-ST dated 20th June, 2012 as amended by Notification No
45/2012- ST dated 7th August, 2012 has prescribed following services
under Section 68 (2) for the purposes of reverse charge mechanism:
 provided or agreed to be provided by an insurance
agent to any person carrying on the insurance business;
• provided or agreed to be provided by
way of sponsorship, to any body
corporate or partnership firm located
in the taxable territory
SERVICES COVERED UNDER
REVERSE CHARGE
 provided or agreed to be provided by a goods transport agency in
respect of transportation of goods by road, where the person liable to
pay freight is
a) any factory registered under or governed by the Factories Act, 1948 (63
of 1948);
b) any society registered under the Societies Registration Act, 1860 (21 of
1860) or under any other law for the time being in force in any part of
India;
c) any co-operative society established by or under any law;
d) any dealer of excisable goods, who is registered under the Central
Excise Act, 1944 (1 of 1944) or the rules made there under;
e) any body corporate established, by or under any law; or
f) any partnership firm whether registered or not under any law
including association of persons;
SERVICES COVERED UNDER
REVERSE CHARGE
 Services provided or agreed to be provided byA) An arbitral tribunal; or
B) An individual advocate or firm of advocates by way of legal services,
to any Business Entity located in The Taxable Territory
 Services provided by an arbitral tribunal, an individual advocate or firm of
advocates by way of legal services
 To any person other than a Business Entity or
 A Business Entity with a Turnover Upto Rs.10 Lacs in the preceding Financial
Year
is exempt vide Entry No 6 of the Exemption Notification No 25/2012-St dated 20th
June, 2012
Business entity is interpreted in Section 65B (17) to mean any person ordinarily
carrying out any activity relating to industry, commerce or any other business or
profession
SERVICES COVERED UNDER
REVERSE CHARGE
Government or local authority by way of support services excluding,i. Renting of immovable property, and
ii. Speed post, transport services and services in relation to aircraft or vessel in certain
cases

to any Business Entity located in The Taxable Territory
• “support service” 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 for any reason whatsoever and shall include advertisement
and promotion, construction or works contract, renting of immovable property,
security, testing & analysis.
Business entity is interpreted in Section 65B (17) to mean any person ordinarily
carrying out any activity relating to industry, commerce or any other business or
profession
Services covered under reverse
charge (Not. 30/2012 – ST)
• Service provided by way of :
• Renting of motor vehicle designed for carrying
passengers to any person not in similar line of business
• Supply of manpower,
• Security Services (inserted w.e.f. 07.08.2012)
• Service portion of Works contract (Notified services)
By an individual, HUF, Partnership Firm or Association of persons
to a business entity registered as body corporate in a taxable territory
 Provided or agreed to be provided by a director of a company
to the company (inserted w.e.f. 7th August, 2012)
 Provided or agreed to be provided by any person which is located in a
non-taxable territory and received by any person located in the taxable
territory (Import of Services).
Proportions of service tax
Attributable to SP & SR
Extent of service tax payable by Service Provider and Service Receiver
SR.
No
1
Description of Service
Service Provided
To
Liability on
Service
Provider (%)
Liability on
Service
Receiver (%)
Insurance Auxiliary Service
Person carrying
Insurance Business
Nil
100%
Any person
Sponsorship Service
Body Corporate or
Partnership Firm
Nil
100%
Any person
Any Taxable Service
Any person
Nil
100%
Consignor or
Consignee
Nil
100%
Nil
100%
Nil
100%
Nil
100%
Services
Provided By
Insurance Agent
2
3
4
Goods Transport Transport of Goods by Road
Agency
Service
5
6
7
Arbitral Tribunal
Legal Consultancy Service
Individual
Advocate
Legal Consultancy Service
Government or
Local Authority
Support service by
Government or local authority
Business Entity
Proportions of service tax
Attributable to SP & SR
Extent of service tax payable by Service Provider and Service Receiver
S.
No
Services
Provided By
Liability on
Service
Provider (%)
Liability on
Service
Receiver (%)
Renting or hiring of motor
vehicle to carry passenger on
abated value i.e. 40%
Nil
100%
Renting or hiring of motor
vehicle to carry passenger
on non abated value
60%
40%
25%
75%
Works Contract Service
50%
50%
Security services
25%
75%
Description of Service
Service Provided
To
8
9
10
11
Individual, HUF,
Firm, AOP
Supply of Manpower Service
Body Corporate or
Company
12
POINTS TO
PONDER
Issues –Invoice
• Is Service Provider required to state Service Tax payable
by Service recipient under RCM in his Invoice ?
Quantum of service tax to be exhibited
in the relevant Invoice/Bill/Challan

Service provider is required to comply with Rule 4A of Service Tax Rules,
1994.

According to Rule 4A(1) (iv) of Service Tax Rules, 1994 Service tax payable on
the Description and value of Taxable Service provided or agreed to be
provided is required to be exhibited in the invoice/bill/challan.

In the present context, Service tax payable means Service tax payable by the
service provider.
•
In fact, at Para 10.1.2 in the Guidance Note. It has been clarified that:
“The service provider shall issue an invoice complying with Rule 4A of
the ST rules. ……………….The ST payable would include service tax
payable by the service provider”.

However, as a precautionary measure, the relevant Service provider [either at
the request of service recipient or at his own discretion] may specify in invoice
that service recipient is also under statutory obligation to deposit applicable
percentage of Service tax payable by him directly to the credit of Central
Government.
Proforma of Service Tax Invoice/Bill/Challan in case of works contract services
Serial No………
M/s. ABC
(Name, address & registration no. of Service Provider)
Date : __/___/___
To
XYZ Ltd
(name & address of service Receiver)
Sr.
No.
Description of Taxable Services
Value of Taxable
Services
Total Amount
Construction of new Residential Complex
Service
Rs. 10,00,000
Rs. 10,00,000
(I)
Service Tax @12% on 40% of value of
Taxable service Rs. 48,000[service Tax
payable by service Provider @50% of Rs.
48000]
Rs. 24,000
(II)
Primary education Cess @2% on Rs. 24000
Rs. 480
(III)
Secondary & Higher Education Cess @ 1%
on Rs. 24000
Rs. 240
TOTAL
Rs. 10,24,720
Please Note that Service Recipient is statutory required to deposit 50% of service tax accordance with
provisions of Section 68(2) of Finance Act, 1994 read with Rule 2(1)(d) of service Tax Rules, 1994 i.e. Partial
Reverse Charge Mechanism.
Signature of Service Provider/ Authorized Signatory
Issue –Impact of threshold exemption
•
XYZ Ltd has received a Bill in respect of works contract for Construction of
Factory shed carried out by Mr. A for Rs.5,00,000 on 5th August,2012.
• In said Bill service tax was not charged by Mr. A as he was claiming basic
exemption limit under Notification 33/2012 –dated 20.06.2012
• Bill was paid by XYZ Ltd on 15th October,2012
•
XYZ Ltd claimed that there is no service tax liability as Mr.A was claiming
basic exemption limit
• Whether XYZ Ltd is required to pay Service Tax under RCM ?
Impact of threshold exemption
availed by the service provider
• A particular service provider may avail the benefit of threshold [small
service provider] exemption limit of Rs. 10 Lakhs by virtue of
Notification No. 33/2012-S.T., dated 20-6-2012 with effect from 1-7-2012.
• Question is whether same will absolve recipient also from its liability
under Reverse Charge.
• Threshold exemption limit of Rs.10 lakhs is available under Notification
No. 33/2012-ST. It contains a non-obstante clause which reads as:
“Nothing contained in this Notification shall apply to:
(i) ……………….
(ii) Such value of taxable services in respect of which service tax shall
be paid by such person and in such manner as specified under
sub-section (2) of section 68 of the said Finance Act read with the
service tax Rules, 1994.”
Impact of threshold exemption
availed by the service provider
• Section 68(2) referred to in the above clause including makes service
recipient liable to pay the tax in certain situations.
• Thus, the clarification answers that in both the situations, whether
having full or partial liability, service tax is payable by the recipient
irrespective of the threshold exemption availment by the provider.
To say it differently, service recipient has to discharge its Service
tax liability irrespective of the value of services as there is no
monetary limit of exemption when Service tax liability is
discharged under reverse charge mechanism.
Illustration
Service Tax payable
by service Provider
(Mr.A)
Contract Value
Value of Sharing of
Taxable Service
5,00,000
2,50,000
Taxable value
2,50,000
40%
Service Tax Rate
Respective Service Tax
Payable
Service tax payable by service
recipient
(XYZ Ltd)
12.36%
The liability of the
service provider is
below the basic
exemption limit of Rs.
10lakhs.
12,360
Point of Taxation for the Service
Provider and Service recipient
Timing aspect for the payment of Service Tax will have to be examined in both
the cases from different perspective as per Point of Taxation Rules, 2011
a) Payment of Tax by Service Provider:
CASES
POINT OF TAXATION
Invoice is issued within 30 days from date -Date of Invoice
of completion of service
- Date of Receipt of payment
Whichever is earlier
Invoice is not issued within stipulated 30
days from the date of Receipt of Payment Date of completion of service
or Date of Completion of Service
Point of Taxation for the Service
Provider and Service recipient
b) Payment of Tax by Service Recipient:
CASES
POINT OF TAXATION
Payment of invoice is made by the Date of payment to Service provider
service recipient within six months of
the date of invoice.
Payment is not paid within 6 months of Date of Invoice of Service provider
date of invoice and date of invoice is
issued within time limit
Payment is not paid within 6 months of Date of Completion of service
date of invoice and date of invoice is
not issued within time limit
POINT OF TAXATION IN REVERSE CHARGE
MECHANISM FOR SERVICE RECIPIENT
In case of payment is
made after provision of
service
In case of advance
payment
Date of
advance
payment
If payment is
made within 6
months
If payment is not made within
6 months
Date of such
payment
If bill is not issued within
If bill is issued within
time limit
time limit from date
of completion of
service
Date of
Bill/Invoice
Date of completion of
service
Point of Taxation for the Service
recipient
DATE
INVOICE
OF DATE
OF POINT
OF
PAYMENT
TAXATION
(POT)
REASON
12/3/2012
14/04/2012
14/04/2012
Payment by Service Recipient is done
within 6months and so POT is the
date of payment
12/12/2012
15/06/2013
12/12/2012
Payment is not made within 6months
hence Date of Invoice is the POT.
Also interest will be charged on the
bill amount at the rate specified u/s 75
from POT to the date of payment i.e.
from 05th/6th January,2013 to 15th
June,2013
Issues- Liability of SP & SR
•
Service Provide has not availed exemption or abatement which is
legally available and prepared the invoice without considering
exemption or abatement. Can service recipient claim such exemption or
abatement for payment of service tax under RCM?
•
Proprietor ‘A’ is engaged in providing security service to M/s Z Ltd. A
has charged service tax on entire amount of consideration charged for
such service to Z Ltd. M/s Z Ltd. has paid the entire payment including
service tax to A. The entire amount of service tax collected by A is
deposited with Government. The department alleges that M/s Z Ltd. is
liable to deposit service tax under reverse charge and accordingly
issues a show cause notice to M/s Z Ltd. who has approached you for
advice.
Liability of service provider and service
recipient is independent of each other
•
Service tax liability of service provider and service recipient is for
respective specified amounts and is independent of each other.
•
Accordingly, both are free to choose their own method for discharging
their own specified share of service tax liability.
•
Say, in case of Works Contract Services, in accordance with rule 2A (i)
[i.e. Gross Amount Charged for the works contract less the value of
property in goods transferred in the execution of the said works
contract] of service tax (Determination of Value) Rules, 2006 and
accordingly discharge his service Tax liability .
•
On the other hand, the service Recipient may determine value of Works
Contract Services in accordance with Rule 2A (ii) [ as per Standard
deduction method] of Service Tax (Determination of Value) Rules, 2006.
Issues –CENVAT Credit
•
Safe Ltd has recruited a Security Agency for security of its office
premises and factories .It has received a Bill of Rs.1,00,000 /- from
Security agency for services provided for the Month of June ,2013.
•
Safe Ltd has also availed services on which they have claimed
CENVAT Credit and balance in CENVAT Credit as on 30.06.2013 is
Rs.50000/-
•
Can Safe Ltd. use CENVAT Credit balance of Rs.50000/- to pay service
tax (Rs.9270/-) on security services ?
Mode of discharging liability by service recipient
(Whether SR can pay from CENVAT Credit?)
• It may so happen that SR may be having unutilized CENVAT Credit.
Whether the balance lying therein can be utilized for the payment to be
made under Reverse Charge ?
• CENVAT Credit can be taken by provider of output service
• As per Explanation to Rule 3(4) of CCR provides that “CENVAT
Credit cannot be used for payment of service tax in respect of
services where the person liable to pay tax is the service
recipient.”
• Therefore, Service Recipient has no option but to make payment of ST
in cash in GAR-7 Challan and claim the same as CENVAT Credit
thereafter (If otherwise eligible).
Issues –Transitionary Provisions
• Manpower supply service by an individual to a business entity
registered as a body corporate is provided in the month of June, 2012
• Bill dated 30-06-2012 was raised by service provider.
• The service receiver makes payment for the service on 15-07-2012 for
this bill.
• Is the reverse charge mechanism applicable?
Applicability of partial reverse charge
for services provided before 1-7-2012
• Provisions of partial reverse charge have come into effect in respect of
specified services with effect from 1-7-2012 by virtue of Notification No.
30/2012-S.T., dated 20-6-2012.
• However ,for specified services if Point of Taxation is before 1-7-2012,
then provisions of reverse charge will not apply.
• Circular No. 162/12/2012-S.T., dated 6-7-2012 also clarified that the
provisions of partial reverse charge would be applicable in respect of
such services where point of taxation is on or after 1-7-2012 under
applicable rules in respect of the service provider.
• In short, for any service, where point of taxation is determined and
liability is fastened prior to 01/07/2012 in terms of Point of Taxation
Rules, 2011 , the new provisions of reverse charge do not apply.
Transition…..
Date of
Completion of
Service
Date of
Raising of
Invoice
Date of
Payment
Point of
Taxation
(POT)
Reason
Prior to 30th Prior to 30th Prior to 30th Date
of Reverse
charge
June,2012
June,2012
June,2012
Invoice/
would not apply to
Payment the receiver for
POT
prior
30th
June, 2012
Date of
Date of
Completion of Raising of
Service
Invoice
Date of
Payment
Point of
Taxation
(POT)
Prior to 30th On or after 01st On or after 01st Date
of
June,2012
July,2012
July,2012
Invoice/
Payment
(within
30
days)
Reason
Reverse
charge
would apply to the
receiver as POT is
date of Invoice,
which is on or after
01.07.2012
Availability of CENVAT credit for
the service recipient
• Service Recipient can avail Cenvat credit ,subject to satisfaction of
relevant condition of CENVAT Credit Rules, 2004 as regards to Input
Service under Partial Reverse Charge .
• CENVAT Credit can be availed for service tax charged by service
provider in his Invoice (on Service provider`s share of taxable value)
and also Service tax paid by him under reverse charge (on his share of
taxable value).However point of eligibility of CENVAT is different.
Availability of CENVAT credit
for the service recipient
In respect of Service Tax Charged by
service provider(SP) in Invoice :
•
Credit of service tax paid to the service
provider would be available on the basis of
the invoice .
•
However, subject to the condition that, SP
makes payment of the value of input service
and the service tax thereon within 3 months
from date of invoice.
•
In case, SP fails to pay service recipient within
three months from date of invoice,
- Pay/reverse equal to the CENVAT credit
availed on such input service on the basis of
Invoice
- Reavail CENVAT credit whenever
subsequently payment is made of value of
input service and the service tax
In respect of Service Tax paid by
service recipient (SR) by Challan:
•
The credit of service tax paid by SR
under reverse charge
would be
available on the basis of tax payment
GAR- 7 challan
[ Rule 9(1)(e) of
Cenvat Credit Rules, 2004] and
•
after payment is made of the value of
input service and the service tax.
Case Study :
• TMS Ltd. received a total Invoice of Rs. 26,23,600 from Mr. A on 10th
August,2012 in respect of Works Contract for Construction of
Factory Shed.
• In the said bill, Rs. 25,00,000 was charged for services provided and
Rs. 1,23,600 was charged as Service Tax by the contractor.
• The bill was paid on 15th October,2012 by TMS Ltd.
• As an advisor to TMS Ltd ,you are required to
advice TMS Ltd about its service tax liability,
if any.
Service Tax payable
by service Provider
Contract Value
Service tax payable by
service recipient
25,00,000
12,50,000
12,50,000
40%
40%
Service Tax Rate
12.36%
12.36%
Respective Service Tax
Payable
61,800
61,800
Value of Sharing of
Taxable Service
Taxable value
15th July,2012
Date of completion of service
Date of Invoice of Mr.A
10th August,2012
Date of Payment to Mr.A
15th October,2012
Respective Service Tax to
be paid on
CENVAT Credit to be
taken by TMS Ltd (if
otherwise eligible)
5th September,2012
5th November,2012
For Rs.61,800/- Charged by Mr.A to be
taken in the month of August,2012 on
the basis of Invoice
For Rs.61,800/- paid by TMS Ltd
under reverse charge would be
availed in the month of
Issues –Refund of CENVAT
•
Pure Ltd is Trading concern ,dealing in Chemicals an d Solvents .
•
It has been receiving services such Security Service , Works Contract
Service etc for the purpose of its business operations.
•
Due to partial reverse charge, it has paid service tax as service receiver
on such services and since CENVAT cannot be utilised ,it wants to claim
refund of CENVAT Credit .
•
Whether refund can be claimed by Pure Limited ?
Refund of CENVAT credit to service
provider providing services
•
According to Rule 5B of cenvat credit Rules, 2004. If a provider of service
providing services notified under section 68(2) is unable to utilizes the
Cenvat credit availed on inputs and input services for payment of Services
tax on such output services, he shall be allowed refund of such unutilized
Cenvat credit subject to procedure, safeguards, conditions and limitations
as may be specified.
•
It is important that only that service provider is entitled to get refund of
cenvat credit under above mentioned Rule 5B who is discharging service
tax liability under Partial Reverse charge.
•
Hence service provider who is discharging its Service Tax liability under
Reverse charge cannot get refund to CENVAT credit under Rule 5B because
statutory definition of term “output service” under Rule 2(p) of CENVAT
Credit Rules, 2004 specifically excludes a service where the whole of service
tax is liable to be paid by the recipient of service. Resultantly, his services
cannot qualify as “output service” and he is debarred from taking the
refund of CENVAT credit.
Refund of CENVAT credit to
service provider providing services
• Rule 5B of CCR indicates that the refund would be available to service
providers of services notified in section notified in section 68(2) and not
to recipient liable under reverse charge.
• Hence ,say the recipient corporate body of, say, works contracts services
and manpower supply services is engaged in pure “trading activity”
which is not liable for service tax, such trader cannot claim refund.
All birds find shelter
during a rain. But Eagle
avoids rain by flying
above the Clouds.
Problems are common,
but Attitude makes the
difference..!!