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%)
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)
- 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)
- 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).
- 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)
- 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)
- 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|