BY
CA MANOJ KUMAR GOYAL
4F CS02, 4TH FLOOR, ANSAL PLAZA
VAISHALI
MOBILE: 09810148436
EMAIL: manoj.goyal1975@sify.com
REVERSE CHARGE MECHANISM OF SERVICE TAX (RCM)
With effect from 1-7-2012, the central
government has notified the new partial
reverse charge mechanism for the
payment of service tax in respect of
certain taxable services.
THE LIABILITY TO PAY SERVICE TAX
Service tax is an indirect tax, where the service provider has to collect
tax from the service receiver and has to deposit in to Government
account. As per Sec 68 (1) of Finance act 1994, every person providing
taxable service to any person is liable to pay service tax. Hence the
liability to pay service tax is on the service provider. However an
exception to the above said rule has been provided under sub section
(2) of 68 of the Act., in terms of which the central government has the
powers to notify services in respect of which even the service receiver
shall be liable to pay service tax wholly or partially. This is termed as
REVERSE CHARGE MECHANISM. Since in respect of some services
both the service provider and service receiver are liable to pay service
tax proportionately, it is termed as “PARTIAL REVERSE CHARGE
MECHANISM"
SERVICES COVERED UNDER RCM
 Insurance Agent’s Services : 100%
 Services Provided by a GTA in respect of
transportation by road(GTA): 100%
 Sponsorship services Provided to any Body Corporate
or Partnership Firm located in Taxable Territory: 100%
 Services of Arbitral Tribunal provided to any business
entity located in India: 100%
(Minimum threshold of INR 10 lacs)
SERVICES COVERED UNDER RCM
 Legal Services provided by Individual advocates or by
a firm of Advocates to any business entity located In
Taxable Territory:100% (Minimum turnover 10 lacs)
 Support services Provided by Government or local
authority to any business entity located in taxable
territory (Few exceptions) : 100%
 Renting of a motor vehicles designed to carry
passengers, to a Body Corporate who is not in the
similar line of business: 100% / 40%
SERVICES COVERED UNDER RCM
 Supply of Man power for any purpose or Security
Services: 75%
 Service Portion In the Execution Of Works Contract:
50%
 Taxable Services Provided By a person located In a
non taxable Territory To any person located in the
Taxable Territory: 100%
 Services Provided By a Director of a company to the
said Company: 100%
SPECIAL NOTES
 Reverse charge in case of Road Transportation
Services will only be in case where recipient of service
falls under specified category.
 Renting of Motor Vehicle, Supply of Manpower
Services & Services related to Works Contracts to fall
under RCM if provided by Individual, HUF,
Partnership Firm (whether Registered or not)
(including AOP).
SPECIAL NOTES
 In case of GTA Services, the person who pays or is
liable to pay the freight LOCATED IN THE TAXABLE
TERRITORY shall be treated as the person who
receives the service.
 In Works Contract Service, Service Recipient has the
option of choosing the valuation method as per
choice, independent of the method chosen by the
Service Provider.
SPECIAL NOTES
 Business entity means any person ordinarily carrying
out any activity relating to Industry, Commerce or any
other business or profession and includes individual,
HUF, Company, Society, LLP, Firm, AOP, BOI.
 Services provided by one advocate or Firm of advocates
to another advocate/Firm providing legal services is
exempt from Service Tax.
 CENVAT credit can not be availed by a Service
Recipient against the Tax payable under RCM.
THANK YOU
CA MANOJ KUMAR GOYAL
MOB: 09810148436
EMAIL: manoj.goyal1975@sify.com