New Reverse Charge Mechanism (w.e.f. 1.7.2012)

New Reverse Charge Mechanism (w.e.f. 1.7.2012)

The service receiver is liable to pay tax, without any benefit of threshold exemption alongwith service provider also liable for certain percentage on case to case basis (w.e.f. 1.7.2012 as per Notification No. 30/2012-ST dated 20.6.2012 as amended by Notifications No. 45/2012-ST dated 7.8.2012 and 10/2014-ST dated 11.7.2014 and Notification No. 7/2015-ST dated 1.3.2015).

There is no option to service provider to pay Service Tax on his own as under normal course. Also, under partial reverse charge, the law does not provide the option of discharging Service Tax liability either by service provider or by service receiver. Both are under statutory obligation to comply with the requirements of reverse charge mechanism as notified.

Liability to pay under Reverse Charge by Service Receiver

Under Partial Reverse Charge (Proportional)


Under full reverse charge (100%)


  • Renting of motor vehicles to carry passengers
  • Manpower supply & security services
  • (up to 31.03.2015)
  • Works contracts
  • insurance business services by agents
  • Services by recovery agents
  • goods transportation by road
  • sponsorship
  • arbitral tribunals
  • legal services
  • company body corporate director’s services
  • services provided by Government/ local authority excluding specified services
  • services provided by persons located in non-taxable territory to persons located in taxable in territory.
  • Aggregator services (w.e.f. 1.3.2015)
  • Manpower supply and security services (w.e.f. 1.4.2015)
  • Lottery selling / marketing agent’s services (w.e.f. 1.4.2015)
  • Mutual funds agent / distributor services (w.e.f. 1.4.2015)

New Definitions


As per clause 2(aa) of Service Tax Rules 1994, ‘aggregator’ means a person, who owns and manages a web based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator.

Brand Name or Trade Name

As per clause 2(bca) of Service Tax Rules, 1994, ‘brand name or trade name’ means, a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as an invented word or writing, or a symbol, monogram, logo, label, signature, which is used for the purpose of indicating, or so as to indicate a connection, in the course of trade, between a service and some person using the name or mark with or without any indication of the identity of that person.

Amendments in Reverse Charge Mechanism (Vide Notification No. 7/2015-ST dated 1.3.2015)

  1. Services provided by a person involving aggregator in any manner shall be under 100 percent reverse charge mechanism. Aggregator has been defined for this purpose. (w.e.f. 1.3.2015)
  2. Liability to discharge Service Tax under reverse charge has been shifted from receiver of service to person liable for paying Service Tax other than the service provider (w.e.f. 1.3.2015).
  3. Manpower supply and security services have been brought under full reverse charge instead of partial reverse charge @ 75: 25 basis (w.e.f. 1.4.2015)
  4. Services provided by –

(i) mutual fund agents, mutual fund distributors; and

(ii) agents of lottery distributor

have been brought under reverse charge consequent to withdrawal of the exemption on such services. Accordingly, Service Tax in respect of mutual fund agent and mutual fund distributor services shall be paid by the assets management company or, as the case may be, by the mutual fund receiving such services. In respect of agents of lottery, Service Tax shall be paid by the distributor of lottery.(w.e.f. 1.4.2015)

  1. Definition of person liable to pay Service Tax has been incorporated for aggregator, mutual fund and lottery distributors / selling agent.

Reverse Charge at a Glance

Description of Service Liability of (%) Nature of Person
  Service Provider Service Receiver Service Provider Service Receiver
Services provided by insurance agent to any person carrying on insurance business 0% 100%   Insurance Company
Services of mutual fund agent or distributor, to a mutual fund or asset management company 0 100% Asset management company or mutual fund Any person
Services of selling or marketing agent of lottery tickets to a lottery distributor or selling agent 0 100% Selling or marketing agent Distributor or selling agent of lottery
Services provided by recovery agents 0% 100%   Banking







GTA : Freight payer in specified cases of Consignor/Consignee 0% 100%   Specified



Sponsorship service 0% 100%   Body Corporate/ Partnership firm
Service provided by 0% 100%   Business Entity
(i) Arbitral tribunal        
(ii) Individual advocate        
(iii) Support service provided by any government/local authority        
Service provided by director to company/body corporate     Individual Company
Renting/hiring any passenger motor vehicle:     Individual/ HUF/Prop/ Partnership Company/ business entry
(a) On abated value 0% 100% -do- -do-
(b) On Non abated value        
(i) up to 30.9.2014 60% 40% -do- -do-
(i) up to 1.10.2014 50% 50% -do- -do-
Supply of manpower or security services 25% 75% -do- -do-
Work contract services 50% 50% -do- -do-
Any service [import of service] 0% 100% Located in



Located in taxable territory
Services involving an aggregator in any manner 0 100%   Aggregator or his agent / representative



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