Applicability of New Reverse Charge Mechanism under Service Tax Law Dear Professional Colleague, As the Union Budget

has proposed multiple changes in Service Tax in light of Negative List of Services, an important aspect of burden of tax liability under Reverse Charge concept has also been proposed to be replaced from existing provisions. Applicability of New Reverse Charge Mechanism According to Notification No 15/2012-ST dated 17.03.2012, the proposed Reverse Charge Mechanism will be made applicable from the date on which Section 66B of the Finance Act, 1994 comes into force. The said Section 66 will come into force only upon the date when the Finance Bill, 2012 is passed by the Parliament and receives the consent of the Honble President of India to be called as Act. Therefore, the new reverse charge mechanism will be applicable from the date when Finance Bill, 2012 is enacted. Clarification on new reverse charge mechanism in respect of services of Rent a cab, Manpower Supply and Works Contract Under the new reverse charge mechanism will also be applicable in respect of a) Rent a cab service b) Manpower power supply service c) Works Contract service However, this reverse charge under above mentioned three services will be applicable only if, the service provider of these 3 services is an Individual or HUF or Proprietary or partnership firm or AOP and the service receiver is a Company registered under Companies Act, 1956 For details and applicability of new reverse charge mechanism in case of all the services, please refer table below: Description of a service Service provider Service receiver Percentage of service tax payable by the person providing service Nil Percentage of service tax payable by the person receiving the service 100

Insurance Services in respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business GTA in respect of services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road Sponsorship in respect of services provided or agreed to be provided by way of sponsorship Arbitral Tribunal in respect of services provided or agreed to be provided by an arbitral tribunal Advocate Services in respect of services provided or agreed to be provided by individual advocate Support Service

Insurance agent

Business man carrying on insurance business Consignor or Consignee is specified person Body corporate or partnership firm Business entity

Goods transport agency

Nil

100

Any person

Nil

100

Arbitral tribunal

Nil

100

Individual advocate

Business entity

Nil

100

Government

Business

Nil

100

in respect of services provided or agreed to be provided by way of support service by Government or local authority Rent a Cab Services (a)in respect of services provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger on abated value. (b)in respect of services provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger on non abated value. Supply of Manpower in respect of services provided or agreed to be provided by way of supply of manpower for any purpose Works Contract Services in respect of services provided or agreed to be provided by way of works contract in respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory Individual/HUF/ Proprietary or partnership firm/AOP

entity

Company under Companies Act, 1956

Nil

100

60

40

Individual/HUF/ Proprietary or partnership firm/AOP Individual/HUF/ Proprietary or partnership firm/AOP Any person

Company under Companies Act, 1956 Company under Companies Act, 1956 Any person

25

75

50

50

Nil

100

Hope the same will also assist in your professional endeavors.

Journey of transformation should continue With Warm Regards Atul Kumar Gupta B Com (Hons) FCA, FICWA, MIMA Former Chairman NIRC of ICAI Former Chairman NIRC of ICWAI Author of An Introduction to Service Tax Author of Comprehensive Guide to Service Tax Mobile : 9810103611 Email : atul@servicetax.net