Reverse Charge Mechanism under Service Tax

Reverse Charge Mechanism & Refund of Cenvat Credit to service provider

As evident from the name ‘Reverse Charge’ in service tax it is brought where the liability of payment of service tax shall be on the recipient of services or on the both receiver & provider of services partially.

Following are the services which are covered under Reverse charge mechanism by notification 30/2012, dated 20-06-2012 effective from 01-07-2012:

Sl. No.	Description of Service	Service Received by	% of service tax payable by provider	% of service tax payable by receiver
1	Insurance Agent	Any person carrying insurance business	Nil	100
2	Goods Transport agency	See note 1	Nil	100
3	Sponsorship	Body Corporate/ Partnership firm	Nil	100
4	Arbitral tribunal	Any business entity	Nil	100
5	Legal services by Individual/ Firm of Advocates	Any business entity	Nil	100
6	Support services provided by Govt. excluding 1. Renting of immovable property 2. Service by postal department 3. Service in relation to aircraft or vessel 4. Transport od goods or passengers.	Any business entity	Nil	100
7	Renting or hiring any motor vehicle to carry passenger on abated value by individual, HUF, Partnership, AOP	Any person not engaged in similar line being body corporate	Nil	100
8	Renting or hiring any motor vehicle to carry passenger on non-abated value by individual, HUF, Partnership, AOP	Any person not engaged in similar line being body corporate	60	40
9	Supply of manpower by Individual, HUF, Firm, AOP	Body corporate	25	75
10	Execution of works contract by individual, HUF, Partnership, AOP	Body Corporate	50	50
11	Taxable services by person located in non-taxable territory	By person located in taxable territory	Nil	100

Notes:

1.      Receiver of service in case of GTA

a.       Transport by road in goods carriage- who pays freight

Where the person liable to pay freight is:

                                                  i.      Factory

                                                ii.      Registered Society

                                              iii.      Registered Co-operative society

                                              iv.      Registered dealer of excisable goods

                                                v.      Body Corporate

                                              vi.      Partnership firm

Any person who is liable to pay freight either himself or through his agent for the transportation.

Refund of CENVAT credit to service providers providing services taxed on reverse charge basis:

CENVAT credit Rules, 2004 Rule 5B. NN 28/2012

A provider of services

Providing services notified u/s 68(2)

Being unable to utilise the CENVAT credit

Availed on inputs and input services

For payment of service tax on such output services

Shall be allowed

Refund of

Such unutilised Cenvat credit

Subject to

Conditions specified by board.

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