Information‎ > ‎Service Tax India‎ > ‎

reverse-service-tax-recepient-july-2012


Feel free to call CA Naresh Shah  on 022-64500000

===


Reverse service tax is payable for advocate fees, importer of services in taxable territory of India (note, service completed outside India is prima facie, excluded from 1.7.2012), security services etc.

===========

Payment of Service Tax under reverse charge mechanism.

Normally, service tax is payable by the person who is providing the taxable service. However, the Central Government is empowered under Section 68(2) to notify the specified persons who are liable to pay service tax in respect of notified taxable services.

In this budget a proviso has been inserted wherein the Central Government can notify the specified services and the extent of service tax which shall be payable such person and the remaining part of the service tax shall be paid by the service providerIn other words, by insertion this proviso both the service recipient and the service provider together is required to pay the service tax.

The Government has issued Notification No.15/2012-Service Tax dated 17.03.2012, under section 68(2) by notifying the following taxable services and the extent of service tax payable thereon by the person liable to payservice tax:

a. Notified Taxable Service:

ü      In case of Insurance agent, the Insurance Company;

ü      In case of GTA, the consignor or consignee or his agent who effects the payment;

ü      In case of sponsorship services, the body corporate or partnership firm located in the taxable territory (i.e.,India)

ü      Service provided by Arbitral Tribunal or an Individual advocate or the support service provided or agreed to be provided by Government or local authority, to any business entity, then business entity is required to pay theservice tax;

ü      Services provided by Individual, HUF, Firm, AOP in respect of:

i.      Renting or hiring of motor vehicle designed to carry passenger; or
ii.      Supply of manpower; or
iii.      Works contract

Then the Company or body corporate is required to pay service tax.

ü      In case of import of taxable service, the recipient is required to pay service tax.           

b.      Extent of service tax payable by the recipient and by the service provider is as follows:

Sl. No

Description of service

% of service taxpayable by the service provider

% of service taxpayable by the recipient

1

Insurance agent

Nil

100%

2

GTA

Nil

100%

3

Sponsorship

Nil

100%

4

Arbitral Tribunal

Nil

100%

5

Individual Advocate

Nil

100%

6

Support service by Government or local authority

Nil

100%

7

Renting or hiring of motor vehicle to carry passenger on abated value

Nil

100%

8

Renting or hiring of motor vehicle to carry passenger on non abated value

60%

40%

9

Supply of manpower

25%

75%

10

Works contract

50%

50%

11

Import of taxable service

Nil

100%

c. Date of Applicability – The Government has vide NOTIFICATION NO. 19/2012-SERVICE TAX, DATED 5-6-2012specified that above provision will come into effect from 1st day of July, 2012.

servicetax-codes-restored-nov-2012

posted 22 Nov 2012, 22:37 by CA Kunjan Shah

new circular no.165 is attached below this page. Please click on download arrow if you want the circular 165.

41 Notification 2012

posted 1 Nov 2012, 12:47 by CA Kunjan Shah

This notification is important for refund of service tax by exporters.

service-tax-return-due-date extended

posted 30 Oct 2012, 12:15 by CA Kunjan Shah

as you all might know, service tax return due date is now extended beyond Sep 2012 for 1st half of 2012-2013.
now 1st quarter return can be filled (after department issues new service tax return forms ). 
More clarity from department is awaited..

reverse-service-tax-advocates-2012

posted 19 Sep 2012, 03:26 by CA Kunjan Shah

Advocates were resisting being brought within the ambit of Service Tax by their argument that their basic function is to assist the Court in effective justice delivery system and while doing so they function more like officers of the Court than as service provides. They were assisting the litigants in obtaining justice and that charging of fees was just ancillary to the main object. However, appreciating the popular sense they have agreed to be so covered by the Finance Act 2012, albeit in a restricted manner. 


The provisions for charging service tax on Advocates may be summarized as under: 

1) The services of Advocates are not covered in the Negative List. Such that their service would be taxable if otherwise not exempted or listed in the Exempt List. 

2) The Exempt List ( 25/2012 – ST dated 20/6/12), known as Mega Exemption deals with the service of Advocates at serial no. 6 as under 

6. Services provided by-
(a)
An arbitral tribunal to -

(i)
any person other than a business entity; or

(ii)
a business entity with a turnover up to rupees ten lakhin the preceding financial year;
(b)
An  individual   as  an  advocate   or   partnership   fir of advocates by way of legal services TO-

(i)
an advocate or partnership firm of advocates providinglegal services ;

(ii)
any person other than a business entity; or

(iii)
a business entity with a turnover up to rupees ten lakhin the preceding financial year; or
(c)
A person  represente on an arbitral  tribunal  to an arbitraltribunal

3) In this article I propose to discuss services in clause 6(b) only. 

Services provided by 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 legalservices ; or
(b)
any person other than a business entity; or
(c)
a business entity with a turnover up to rupees ten lakh in thepreceding financial year; or
(d)
a business  entity  with a turnover  up exceeding  rupees  tenlakh in the preceding financial year.




Receiver of Service
Status-Exempt/Taxable
Perso liabl topay service tax
(a)     An advocate  or partnershi firmof advocates providing legal services.
Exempt
None
(b)     any person other than a businessentity
Exempt
None
(c)     a business entity with a turnover up to rupees ten lakh in the precedingfinancial year
Exempt
None
(d)     a business entity with a turnover exceeding rupees ten lakh in the preceding financial year.
Taxable
Business Entity

  • a. For the purpose of analysis An advocate includes a partnership firm of advocates 
  • b. Business Entity means any Person ordinarily carrying out any activity relating to industry, commerce or any other business or profession and includes: 
    • (i)an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a society, (v) a limited liability partnership, (vi) a firm, (vii) an association of persons or body of individuals, whether incorporated or not, (viii) Government, ix) a local authority, or (x) every artificial juridical person, not falling within any of the preceding sub-clauses; 
  • c. Legal service means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority; 

1) The services shall be exempt only when the service provider, in the first instance, provides legal services irrespective of the status of the receiver of the service. For example If a practicing Individual Advocate named A provides legal services to another practicing Individual Advocate named B who uses such legal services in providing legal services to his clients then, the services provided by A will be exempt under clause (a) above. 

2) If B uses the input legal services not in providing further legal services but in providing some other services like imparting coaching to students of Law through conduct of coaching classes then such services –to this extent- will not be covered by clause (a) because the condition of providing legal services by B is violated. 

3) However even in the case situation (2), the service will still be exempt but under clause (b). If B imparts the coaching not on a regular basis and not restricted to a select group of registered students only, then he may not be treated as a Business Entity ordinarily carrying out any activity relating to industry, commerce or any other business or profession and thus exemption will be available. 

4) Moreover , in addition to his main profession of practice, if B also imparts the coaching on a regular basis such that his activities may be treated as an activity relating to industry, commerce or any other business or profession and if the value of his turnover in the preceding financial year was not more than Rs. 10 lakhs, then he will be treated as a Business Entity and the exemption will be available under clause(c) 

5) But in a case similar to case (4) above with the modification that the value of turnover of B in the preceding financial year was more than Rs. 10 lakhs, then the exemption will be lost under clause (d) above and B will have to pay service tax under reverse charge as a recipient of service. 

6) On the other hand If A-practicing individual advocate- provides Coaching 

Services to B-another individual advocate- who uses the coaching services in providing legal service , then such service shall not be covered by clause 6 of the Exempt list- not being legal services in the first instance and A will have to pay service tax under Direct Charge. 

7) If A provides legal service to one brother (X) in a suit filed against his another brother(Y) relating to the division of family property, then the full value of the service will be exempt under (b), because the service recipient X will not be treated as a Business Entity even if the turnover of X exceeded rupees ten lakh in the preceding financial year. 

8) However if X is running a small business of trading in miscellaneous items of food and had supplied certain items of food to Y-his own brother- on credit and Y now refuses to make payment for the supply and A-an Individual advocate- is advising X against Y for recovery of the business debts, then X becomes a Business entity and the status of services of A would be as under: 

If the turnove of X in the preceding  financial year was not exceeding  rupees ten lakh
Exempt
If the turnove of X in the preceding  financialyear  exceede rupees ten lakh
Taxable-     service tax payable by X

9) The levy has been explained at serial no. 7.6.1 by Guidance Note: Taxation of Services: An Education Guide issued by the CBEC as under: 


  • 7.6.1 What is the tax liability of advocates, or arbitral tribunal in respect of services provided by them? 

Advocates can provide services either as individuals or as firms. Legal services provided by advocates or partnership firms of advocates are exempt from service tax when provided to the following: 

a) an advocate or partnership firm of advocates providing legal services 

(same class of persons) 

b) any person other than a business entity 

c) a business entity with a turnover up to rupees ten lakh in the preceding financial year However, in respect of services provided to business entities, with a turnover exceeding rupees ten lakh in the preceding financial year, tax is required to be paid on reverse charge by the business entities. 

10) The answer at (a) above “an advocate or partnership firm of advocates providing legal services (same class of persons)” creates confusion than provide clarification. 

a. What does the word “Class of persons” mean ?. Is it a group of identical entities ? If that be so, the following situations arise:

Service Provider
Service Receiver
(1) Individual
(2) Partnership Firm
(1) Individual
Exempt
Taxable
(2) Partnership
Firm
Taxable
Exempt


b. If it means a group of entities engaged in the same type of activity then the following situations arise:

Type of Activity of the Provider
Type of Activity of the Receiver
1)     Legal services
(2)      Other       thanlegal services
(1)      Legalservices
Exempt
a. Exempt ithereceiver is Non Business Entity

b. Exempt if thereceiver is a businessentity with turnover less than rupees tenlakhs  in  the preceding financialyear.

c.   Taxable if thereceiver is a businessentity with turnovermore    than    rupeesten lakhs ithe preceding financialyear. Service tax will




b payable   b thereceiver.
(2)      Other     thanlegal services
Taxable-- servicetax payable btheProvider-- i.enotcovered by theExempt List
Taxable--servictax payable by the Provider--i.e. not covered by the Exempt List.


Certainly the classification given at (a) does not seem to be the intention of clarification. For all the practical purposes classification at (b) is the intention of the clarification. 

11) Applicability of SSI provisions to Legal services 

Service tax, like any other indirect tax, is a destination based consumption tax born the ultimate user and collected by the provider. The core of the system is section 66B which is the charging section levying service tax @ 12% on the value of all services, other than those services specified in the negative list which are provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. 

A reading of the above section makes it clear that the primary liability is on the person providing the service, though the same may be collected in a manner prescribed by the taxing authority. Section 68 prescribes the manner of collection of the tax. The manner of collection is as under: 

(a) Collected 100% from the Provider- Direct Charge 

(b) Collected 100% from the Receiver- Reverse Charges ( discussion follows) 

(c) Collected partially from both, the provider and the receiver, - Partial Reverse Charge-2012 

SSI exemption Notification No. 33/2012 - Service Tax dated the 20th June, 2012 if read, in the light of the above discussion would clarify the following: 

1) This notification exempts taxable services of aggregate value not exceeding Rs. 10 Lakhs in any financial year from the whole of the service tax leviable thereon under section 66B of the said Finance Act subject to conditions, inter alia as under: 

a) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year. 

b) The notification does not apply to 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 Service Tax Rules,1994.(Payment under Reverse Charge) 

c) Aggregate value means the sum total of value of taxable services charged in the first consecutive invoices issued or required to be issued, as the case may be, during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviable thereon under section 66B of the said Finance Act or under any other notification. 

d) The provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him. 

2) It is interesting to note that this notification does not apply to the cases in which service tax is payable under Reverse Charge mechanism i.e. section 68(2).But an exception has been carved out in case of Legal services covered by the Exempt List. Where Services are provided by an individual as an advocate or a partnership firm of advocates by way of legal services to a business entity with a turnover up to rupees ten lakh in the preceding financial year then service tax is not payable by any one. This means that the restriction in the SSI Notification 33/2012 on its applicability “to 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 Service Tax Rules,1994” does not apply to legal services provided in this type of situation.(i.e. Payment under Reverse Charge) 

3) Now the question is : which notification overrides which , particularly when both the notifications are of the same date ? SSI notification 33/2012 excludes from within it coverage, the payment made under section 68(2) whereas Notification 25/2012 provides SSI exemption to a recipient of service, being a business entity with a turnover up to rupees ten lakhs in the preceding financial year though only in respect of Legal services. It is ,but an accepted legal principle, that when two or more notifications are in conflict, the notification which is more beneficial to the tax payer shall be applicable. Therefore notification 25/2012 shall override SSI notification 33/2012 to the extent of its non applicability to situations wherein the benefit is denied to the receiver making the payment of service tax u/s 68(2) in respect of legal services received. 

12) The business entity which pays service tax under this class i.e. Legal Services can, however, take input tax credit of such tax paid in terms of Cenvat Credit Rules, 2004, if otherwise eligible. 

13) The provisions relating to arbitral tribunal are also on similar lines. A person serving as a member of an arbitral tribunal comprising many arbitrators and receiving an amount from the arbitral tribunal then such service is exempt under sr. no. 6(c) of the mega notification. 

14) The above write up is the absolute personal opinion of the writer and does not amount to an expert legal opinion. It may or may not depict the legal position sought to be conveyed by the statute. Readers are cautioned to evaluate the actual legal position before acting on this write up. Further, this write up is meant only for an academic interest and not for any other purpose . 

Credit goes to  by: CA LALIT MUNOYAT ,.Com.(Hons.), CS, FCA, 9820193508 ,28th June 2012

Reverse Service Tax - Directors

posted 19 Sep 2012, 03:21 by CA Kunjan Shah

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

Government of India
Ministry of Finance 
(Department of Revenue)

 

Notification No. 45/2012 - Service Tax

 

New Delhi, the 7th August, 2012

 

G.S.R. (E).- In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.30/2012-Service Tax, dated the 20th June,2012,  published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),  vide number  G.S.R.  472 (E), dated the 20th June, 2012, namely:-

 

In the said notification,-

 

(a)  in para I, in clause (A),-

 

(iafter the sub-clause (iv), the following sub-clause shall be inserted, namely :-

 

“(iva)   provided or agreed to be provided  by a director of a company to the said company;”;

 

(ii)  in sub-clause (v), after the words “manpower for any purpose”, the words “ or security services” shall be inserted.

 

(b)  in para II, in the Table,-

 

(i)   after Sl.No5, the following S.No. and entries shall be inserted, namely:-

           

“5A

in respect of  services  provided or agreed to be provided  by a director of a company to the said company

Nil

100%”

 

(ii)  in Sl.No. 8, in the entries under the heading ‘Description of a service’, after the words “manpower for any purpose”, the words “or security services” shall be inserted.

 

[F.No. 334 /1/ 2012-TRU]

 

(Rajkumar Digvijay)

Under Secretary to the Government of India 

 

 

Note.- The principal notification was published in the Gazette of India, Extraordinary, vide notification No. 30/2012 - Service Taxdated 20th June, 2012, vide number G.S.R. 472 (E), dated the 20th June, 2012 and the same has not been amended so far.

 

Reverse Service Tax 46 2012 Director Security Services

posted 19 Sep 2012, 03:19 by CA Kunjan Shah

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

Government of India
Ministry of Finance 
(Department of Revenue)

 

Notification No. 46/2012 - Service Tax

New Delhi, the 7th August, 2012

 

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely:—

 

1.         (1) These rules may be called the Service Tax (Third Amendment) Rules, 2012.

            (2) They shall come into force on the date of their publication in the Official Gazette.

 

2.         In the Service Tax Rules, 1994, in rule 2, in sub-rule (1),-

 

(A)  in clause (d), in sub-clause (i),-

 (i)  after the item (E), the following item shall be inserted, namely;-

 

“(EE) in relation to service provided or agreed to be provided by a director of a company to the said company, the recipient of such service;”;

 (ii)  in the item (F), in the sub-item (b), after the words “manpower for any purpose”, the words “ or security services” shall be inserted.          

 

(B)   after clause (f), the following clause shall be inserted, namely:—

 

“(fa) “security services” means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity;”

 

[F.No. 334 /01/2012- TRU]

 

 

(Raj Kumar Digvijay)

Under Secretary to the Government of India

 

 

Note.- The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 2/94-ST, dated the 28th June, 1994 vide number G.S.R. 546(E), dated the 28th June, 1994 and was last amended by notification No. 36/2012-Service Tax, dated the 20th June, 2012 vide number G.S.R. 478 (E), dated the 20th June, 2012.

 

1-6 of 6