2. SEMINAR ON “ENABLING SERVICE TAX PRACTICE” ORGANISED BY- BARODA BRANCH OF WIRC OF ICAI

3. Service( Meaning defined )- Sec 65B Any activity For consideration Carried out by a person for another Also, includes declared service.

4. Negative list is not chargeable to tax at all as they are excluded from section66B. Negative list is a part of law, can be amended only in budget with parliaments approval. NEGATIVE LIST Services in the exemption list is chargeable to tax but are expressly exempted. Exemptions can be withdrawn by the ministry by issuing relevant notifications. EXEMPTION

5. NEGATIVE LIST Service by Government or a local authority Excluding –speed post, express parcel post, life insurance and agency services provided to a person other than Government – Services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport; –Transport of goods and/or passengers; –Support services provided to business entities

6. SUPPORT SERVICES Section 65B(49) -Support services means “infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain services by outsourcing from others for any reason whatsoever and includes advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis”

7. NEGATIVE LIST Services by RBI Any service that is provided by a diplomatic mission of any country located in India Services relating to agriculture or agricultural produce

8. NEGATIVE LIST Trading of Goods – includes future contract of commodities Process amounting to manufacture or production of goods – "process amounting to manufacture or production of goods" means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944) or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force;

9. NEGATIVE LIST Selling of space or time slots for advertisements other than advertisements broadcast by radio or television Service by way of access to a road or a bridge on payment of toll charges Betting, gambling or lottery - “Betting or Gambling” defined in Section 65B(15) Admission to entertainment events or access to amusement facilities

10. NEGATIVE LIST Transmission or distribution of electricity by electricity transmission or distribution utility  Transmission or Distribution of Electricity by following entities would cover within Negative List Services – Central Electricity Authority; State Electricity Board; Central Transmission Utility; State Transmission Utility; a distribution or transmission licensee licensed under the said Act.  Builder, Developer or Housing Society charges separately for distribution of electricity with a residential complex, would not cover under this exclusion

11. NEGATIVE LIST Specified Education Service – pre-school education and education up to higher secondary school or equivalent –education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force –education as a part of an approved vocational education course.

12. NEGATIVE LIST Renting of Residential Dwelling for use as residence  Residential dwelling has not been defined in the Act and hence it should be interpreted in common parlance and it means any residential accommodation but does not include hotel, inn, guest house, camp-site, lodge etc meant for temporary stay.

13. NEGATIVE LIST Financial Services – services by way of extending loans, advances to the extent consideration is represented by interest or discount – inter-bank sale or purchase of foreign currency amongst banks or authorized dealers or amongst banks and such dealers.

14. NEGATIVE LIST Transportation of Passengers a stage carriage, railways in a class other than first class or an air-conditioned coach metro, monorail or tramway inland waterways; public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and metered cabs, radio taxis or auto rickshaws.

15. NEGATIVE LIST Services of Transportation of Goods  Transportation of goods by road except GTA and Courier Service;  Transportation of goods by an air craft or vessel from a place outside India to the customs station of clearance in India; or  Transportation of goods by inland waterways

16. NEGATIVE LIST Funeral, burial, crematorium or mortuary services including transportation of the deceased

17. MegaExemptions Mega Exemptions Notification 25/2012 –dated 20.06.2013 (as amended)

18. LIST OF SERVICES UNDER MEGA EXEMPTION & NEGATIVE LIST SERVICES TO INTERNATIONAL & DOMESTIC ORGANISATION ME-1 : Services provided to United Nations or a specified international organization (As declared by Central Government in United Nations Privileges & Immunities Act 1947). ME-25 : Services provided to the government or local authority by way of- a) Carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement & upgradation; OR b)Repair and maintenance of a vessel

19. LIST OF SERVICES UNDER MEGA EXEMPTION & NEGATIVE LIST ME-34: Services received from a service provider located in a non-taxable territory by- (a)The government, a local authority or an individual in relation to any purpose other than commerce, industry or any other business or profession; (b) An entity registered under Section 12AA of Income Tax Act,1961 (c) a person located in a non-taxable territory. ME-36: Services by Employees state Insurance Corporation to persons governed under the Employees Insurance Act 1948 ME-39: Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243W of the constitution.

20. NOT FOR PROFIT ORGANISATIONS ME-4: Services by an entity registered under section 12AA of Income Tax Act 1961 by way of charitable activities.  Charitable activities are defined in the notification. It means activity relating to – (i)Public health by way of – (a) care or counseling of  terminally ill persons; or  persons with severe physical or mental disability;  persons afflicted with HIV or AIDS ; or  persons addicted to dependence (b) Public awareness of preventive health, family planning or preservation of HIV infection; (ii) Advancement of religion or spirituality;

21. (iii) Advancement of educational programs or skills development relating to –  abandoned, orphaned or homeless children;  physically or mentally abused and traumatized persons;  prisoners;  persons over the age of 65 years residing in rural area or (iv) Preservation of environmental including watershed, forests and wildlife NOT FOR PROFIT ORGANISATIONS `

22. ME-5: Service by a person by way of- (a)Renting of precincts of a religious place meant for general public or (b)Conduct of any religious ceremony ME-28: Service by an unincorporated body or a non-profit entity registered under any law for the time being in force to its own members by way of reimbursement of charges or share of contribution (a) As a trade union (b) For the provision of exempt services by the entity to third persons: or (c) Up to an amount of Rs 5000 per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex NOT FOR PROFIT ORGANISATIONS

23. ME-34: Service received from a service provider located in a non-taxable territory by- (a) Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession; (b) an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or (c) a person located in a non-taxable territory; NOT FOR PROFIT ORGANISATIONS

24. EDUCATION SERVICES ME-8: Services by way of training or coaching in recreational activities relating to arts, culture or sports; ME-9: Provided to an educational institution in respect of education exempted by way of Auxiliary educational services; or Renting of immovable property ME-9A : Any service provided by- (i) the National Skill Development Corporation set up by the GOI; (ii) a sector Skill Council approved by the Sector Skill Corporation or National Skill Corporation; (iii) an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;

25. EDUCATION SERVICES (iv) a training partner approved by the National Skill Development Corporation or the Sector Skill Council In relation to- (a)the National Skill Development Programme implemented by the National Skill Development Corporation; or (b)a vocational skill development course under the National Skill Certificate and Monetary Reward Scheme; or (c)Any other scheme implemented by the National Skill Development Corporation.

26. EDUCATION SERVICES NL-4: Services by way of-  Pre-school education and education up to higher secondary school or equivalent  Education as apart of a curriculum for obtaining a qualification recognised by law  Education as a part of an approved vocational education course.

27.  Auxiliary Education Services means –  in connection with service provided by educational institution Imparting any skill, knowledge, education; or Development of course content; or Enhancement activity for students or faculty  In connection with service provided to educational institution Services relating to admission to such institution; Conduct of examination; Catering for the students under any mid-day meals scheme; Transportation of students, faculty or staff EDUCATION SERVICES

28. ME-2: Health care services by a clinical establishment, an authorized medical practitioner or Para-medics;  Health care services is defined and it means services by way of - diagnosis; or treatment; or care for illness, injury, deformity, abnormality or pregnancy; service to be provided in any recognized system of medicine; includes ambulance services. ME-3: Services by a veterinary clinic in relation to health care of animals or birds; ME-7: Services by way of technical testing or analysis of newly developed drugs, including vaccines and herbal remedies, on human participants by a clinical research organization approved to conduct clinical trials by the Drug Controller General of India;  Health care services does not include hair transplant or cosmetic or plastic surgery. HEALTH CARE

29. CONSTRUCTION, REAL ESTATES & WORKS CONTRACT SERVICES ME-12: Services provided to the government or local authority or a government authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of-  A civil structure or any other original works meant predominantly for other than commerce, industry, or any other business or profession;  A historical monument, archeological site or remains of national importance, archeological excavation, or antiquity specified under ancient monuments and Archaeological Sites and Remains Act 1958;  A structure meant predominantly for use as an educational, a clinical, an art or culture establishment;  Canal, dam or other irrigation works;  Pipeline, conduit or plant for drinking water supply, water treatment, sewerage treatment or disposal; or  A residential complex predominantly meant for self use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65B of the Finance Act;

30. ME-13: Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of- (a) a road, bridge, tunnel, or terminal for road transportation for use by general public; (b) a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana; (c) a building owned by an entity registered under section 12 AA of the Income tax Act, 1961(43 of 1961) and meant predominantly for religious use by general public; (d) a pollution control or effluent treatment plant, except located as a part of a factory; or (e) a structure meant for funeral, burial or cremation of deceased; CONSTRUCTION, REAL ESTATES & WORKS CONTRACT SERVICES

31. ME-14: Services by way of construction, erection, commissioning, or installation of original works pertaining to;  Airport or railways, including mono rail or metro;  Single residential unit otherwise than as a part of a residential complex;  Low cost houses up to a carpet area of 60 square meters per house in a housing project approved by competent authority empowered under the `Scheme of Affordable housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation Government of India;  Post harvest storage infrastructure for agricultural produce including cold storages for such purposes or  Mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages; CONSTRUCTION, REAL ESTATES & WORKS CONTRACT SERVICES

32. SPORTS & GAMES ME-10: Services provided to a recognised sports body by-  An individual as a player, referee, umpire, coach or team manager for participation in a sporting event organised by a recognised sport body;  another recognised sports body; ME-11: Services by way of sponsorship of tournaments or championship organised-  By a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, state or zone;  By Association of Indian Universities, Inter-university sports board, School games federation of India, All India Sports council for the Deaf, Paralympic committee of India, Special Olympics Bharat;  By Central Civil Services cultural and Sports Board;  As part of national games by Indian Olympic Association or  Under Panchayat Yuva Kreeda Aur Khel Abhiyan (PYKKA) Scheme.

33. ENTERTAINMENT & MEDIA ME-15: Temporary transfer or permitting the use or enjoyment of a copyright- a) covered under clause (a) or (b) of sub section (1) of section 13 of the Indian Copyright act, 1957 relating to original literary, dramatic musical, artistic works or b) cinematograph films for exhibition in a cinema hall or cinema theatre; ME-16: Services by a performing artist in folk or classical art forms of music, dance, theatre, excluding services provided by such artist as a brand ambassador; ME-17: Services by way of collecting or providing news by an independent journalist, press Trust of India or united News of India;.

34. TRAVELLING AND TOURISM ME-22: Services by way of giving on hire- (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or (b) to a goods transport agency, a means of transportation of goods; ME-23: Transport of passengers, with or without accompanied belongings by-  Air embarking or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or at Baghdogra located in West Bengal; or  A contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire;  Ropeway, cable car or aerial tramway;

35. HOTEL RESTURANT AND FOOD SERVICES ME-18: Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accommodation below Rs 1000 per day or equivalent;  declared tariff” includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air-conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.  Tax will be liable to be paid on the amount actually charged i.e. declared tariff minus any discount offered. [Circular No. 139/8/11 dated 10-05-2011]

36. HOTEL RESTURANT AND FOOD SERVICES ME-19: Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year. ME-19A : Services provided in relation to serving of food or beverages by a canteen maintained in a factory covered under the Factories Act, 1948 having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year.

37. TRANSPORT AND LOGISTICS ME-20:Services by way of transportation by rail or a vessel from one port in India to another of the following goods-  Relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishaps  Defense or military equipments;  Newspaper or magazines registered with registrar of Newspapers;  Railway Equipments or materials;  Agricultural produce;  Foodstuffs including flours, tea, coffee, jaggery, sugar, milk products, salt & edible oil, excluding alcoholics beverages; or  Chemical fertilizers & oilcakes

38. ME-21: Services provided by a goods transport agency by way of transportation in a goods carriage of-  agricultural produce;  Goods where gross amount charged for the transportation of goods on a consignment transported in a single goods carriage does not exceed Rs1500 or  Goods where gross amount charged for transportation of all such goods for a single consignee in the goods carriage doesn’t exceed Rs 750;  foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages;  chemical fertilizer and oilcakes;  newspaper or magazines registered with the Registrar of Newspapers;  relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or defence or military equipments;” TRANSPORT AND LOGISTICS

39. BUSINESS & MARKETING: ME-6: Services Provided by-  An arbitral tribunal to- (a) Any person other than a business entity; or (b) A business entity with a turnover up to Rs 10 lacs in the preceding financial year;  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 legal services any person other than a business entity; or (b) A business entity with a turnover up to Rs10 lacs in the preceding financial year; or (c) A person represented on an arbitral tribunal to an arbitral tribunal;1

40. ME 29: Services by the following persons in respective capacities-  A sub broker or an authorised person to a stock broker  An authorised person to a member of a commodity exchange  A mutual fund agent to a mutual fund or asset management company;  Distributor to a mutual fund or asset management Company;  A selling or marketing agent of lottery tickets to a distribution or a selling agent;  A selling agent or a distributor of SIM cards or recharge coupon vouchers; or  Business facilitator or a business correspondent to a banking company or an insurance company in a rural area;  Sub contractor providing services by way of works contract to another contractor providing works contract services which are exempt; ME-31: Services by an organiser to any person in respect of a business exhibition held outside India; ME-37: Services by way of transfer of a going concern, as a whole or an independent art thereof; BUSINESS & MARKETING:

41. JOB WORK NL-15: Any process amounting to manufacture or production of goods. ME-30: Carrying out an intermediate production process as job work in relation to-  Agriculture, printing or textile processing;  Cut & polished diamonds & gemstones; or plain & studded jewellery of gold & other precious metals, falling under chapter 71 of Central Excise Tariff Act 1985  Any goods on which appropriate duty is payable by the principal manufacturer; or  Process of electroplating, Zinc plating, anodizing, heat treatment, powder coating, painting including spray painting or auto black, during the course of manufacture of parts of cycles or sewing machines up to an aggregate value of taxable service of the specified processes of Rs.1,50,00,000 in a financial year subject to the condition that such aggregate value had not exceeded Rs.1,50,00,000 during the preceding financial year;

42. BANKING, FINANCIAL & INSURANCE ME-26: Services of general insurance business provided under Specified Schemes. ME- 26A :Services of Life Insurance business provided under following schemes: (a) Janashree Bima Yojana (JBY); or (b) Aam Aadmi Bima Yojana (AABY) This exemption has been inserted vide N. No. 49/2012 – dated 24-12-2012 w.e.f. 24-12-2012

43. MISCELLANEOUS ME-27: Services provided by an incubatee up to a total business turnover of Rs 50,00,000 in a financial year subject to the following conditions, namely  The total business turnover had not exceeded Rs 50,00,000 rupees during the preceding financial year; and  A period of 3 years has not lapsed from the date of entering into an agreement as an incubatee; ME-32: Service by way of making telephone calls from-  Department run public telephones  Guaranteed public telephones operating only for local calls; or  Free telephones at airport and hospitals where no bills are being issued; ME-33: Services by way of slaughtering of animals; ME-35: Services of public libraries by way of books, publications or any other knowledge-enhancing content or material; ME-38: Services of way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets;

44. LIST OF GENERAL EXEMPTIONS OFFICIAL USE OF FOREIGN DIPLOMATIC MISSION Taxable services provided for the official use of a foreign diplomatic mission or consular post in India, or for personal use or for the use of the family members of diplomatic agents or career consular officers therein PROPERTY PAID ON IMMOVABLE PROPERTY Taxable service of renting of an immovable property, from so much of the service tax leviable thereon under section 66B of the said Finance act, as is in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely property tax levied & collected by local bodies. IMPORT OF TECHNOLOGY Service involving import of technology, from so much of service tax leviable as is equivalent to the amount of cess payable on the said import of technology under the provisions of section 3 of the Research & development Cess Act 1986, subject to certain conditions.

47. 10 th December, 2013

48. SEMINAR ON “ENABLING SERVICE TAX PRACTICE” ORGANISED BY- BARODA BRANCH OF WIRC OF ICAI

49. CONTENTS  INTRODUCTION  REVERSE CHARGE MECHANISM  LEGAL BACKGROUND  SERVICES COVERED UNDER REVERSE CHARGE (NOT. 30/2012 – ST)  PROPORTIONS OF SERVICE TAX PAYABLE BY SERVICE PROVIDER & SERVICE RECIPIENT  CERTAIN ISSUES IN RELATION TO REVERSE CHARGE MECHANISM  CONCLUSION

50. Change from Positive to Negative!!  Hitherto, India was following “selective approach” (positive list) for levy of service tax thereby only selected services were made liable to Service Tax.  W.e.f. 1st July, 2012, Comprehensive approach of levy of service tax is introduced, whereby all services are made taxable except those mentioned in the negative list and specifically exempted (negative list approach).  Before the introduction of comprehensive approach of taxation w.e.f 1st July,2012,service tax was payable by the recipient of service only in respect of certain notified services which were specified by the Central Government in Rule 2(1)(d) of the Service Tax Rules, 1994, in view of powers given u/s 68(2) of the Finance Act,1994.

51. Forward to Reverse Charge Mechanism!! General Principle –Service Provider to collect from Service Recipient and pay tax to the Government –Service Recipient is not accountable to the Government directly Reverse Charge Mechanism –Service Recipient called upon to directly pay tax to the Government (either on part of value of service or full value of service)

52. ONUS TO DISCHARGE Service provider Service – AN ACTIVITY Recipient Prima facie, liability to discharge is that of the service provider In specified cases, the liability to discharge service is tax is vested with the recipient of services Division of the responsibility between the provider and recipient of services

53. In terms of section 68(1) of the Act, liability to pay service tax falls on the service provider. Overriding the aforesaid position, section 68(2) of the Act empowers the Central Government to notify such services on which such person, as may be prescribed, shall be liable to pay service tax. By virtue of this section, a person other than the service provider can be made liable to pay service tax and he shall be deemed as if he is the person liable for paying the service tax on such service and all other provisions of this Act shall apply accordingly. Finance Act, 2012 inserts a proviso to section 68(2) of the Act, wherein it is provided that the service provider and the service receiver can jointly be made liable to pay service tax on the same transaction. Legal Background

54. Reverse Charge : Under the new “Negative List” w.e.f.1st July, 2012  Reverse charge as it existed under the erstwhile selective levy of services till 30.06.2012 continues under the new system of taxation also both in case of specified services provided in India and in case of services provided from outside India.  Section 68(2) of the Act is the applicable provision whereby reverse charge i.e. liability to pay full service tax[Full Reverse Charge] is fastened on the recipient of a service in certain situations and service provider is not liable to pay service tax.  Moreover, Concept of Partial Reverse Charge is introduced wherein liability to pay service tax is divided between Service Provider and Service Recipient instead of casting liability on one of them.

55. SERVICES COVERED UNDER REVERSE CHARGE For the period post 1 st July, 2012; Central Government vide notification No 30/2012-ST dated 20 th June, 2012 as amended by Notification No 45/2012- ST dated 7 th August, 2012 has prescribed following services under Section 68 (2) for the purposes of reverse charge mechanism:  provided or agreed to be provided by an insurance agent to any person carrying on the insurance business; provided or agreed to be provided by way of sponsorship, to any body corporate or partnership firm located in the taxable territory

56. SERVICES COVERED UNDER REVERSE CHARGE  provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road, where the person liable to pay freight is a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948); b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; c) any co-operative society established by or under any law; d) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made there under; e) any body corporate established, by or under any law; or f) any partnership firm whether registered or not under any law including association of persons;

57. SERVICES COVERED UNDER REVERSE CHARGE  Services provided or agreed to be provided by- A) An arbitral tribunal; or B) An individual advocate or firm of advocates by way of legal services, to any Business Entity located in The Taxable Territory  Services provided by an arbitral tribunal, an individual advocate or firm of advocates by way of legal services To any person other than a Business Entity or A Business Entity with a Turnover Upto Rs.10 Lacs in the preceding Financial Year is exempt vide Entry No 6 of the Exemption Notification No 25/2012-St dated 20 th June, 2012 Business entity is interpreted in Section 65B (17) to mean any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession

58.  Government or local authority by way of support services excluding,- i. Renting of immovable property, and ii. Speed post, transport services and services in relation to aircraft or vessel in certain cases to any Business Entity located in The Taxable Territory “support service” means infrastructural, operational, administrative, logistic, marketing or any other support of any kind, comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing & analysis. SERVICES COVERED UNDER REVERSE CHARGE Business entity is interpreted in Section 65B (17) to mean any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession

59. Services covered under reverse charge (Not. 30/2012 – ST) Service provided by way of : Renting of motor vehicle designed for carrying passengers to any person not in similar line of business Supply of manpower, Security Services (inserted w.e.f. 07.08.2012) Service portion of Works contract (Notified services) By an individual, HUF, Partnership Firm or Association of persons to a business entity registered as body corporate in a taxable territory PProvided or agreed to be provided by a director of a company to the company (inserted w.e.f. 7th August, 2012) PProvided or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory (Import of Services).

60. Proportions of service tax Attributable to SP & SR Extent of service tax payable by Service Provider and Service Receiver SR. No Services Provided ByDescription of Service Service Provided To Liability on Service Provider (%) Liability on Service Receiver (%) 1 Insurance AgentInsurance Auxiliary Service Person carrying Insurance Business Nil100% 2 Any personSponsorship Service Body Corporate or Partnership Firm Nil100% 3 Any personAny Taxable ServiceAny person Nil100% 4 Goods Transport Agency Transport of Goods by Road Service Consignor or Consignee Nil100% 5 Arbitral TribunalLegal Consultancy Service Business Entity Nil100% 6 Individual AdvocateLegal Consultancy Service Nil100% 7 Government or Local Authority Support service by Government or local authority Nil100%

61. Proportions of service tax Attributable to SP & SR Extent of service tax payable by Service Provider and Service Receiver S. No Services Provided ByDescription of Service Service Provided To Liability on Service Provider (%) Liability on Service Receiver (%) 8 Individual, HUF, Firm, AOP Renting or hiring of motor vehicle to carry passenger on abated value i.e. 40% Body Corporate or Company Nil100% 9 Renting or hiring of motor vehicle to carry passenger on non abated value 60%40% 10 Supply of Manpower Service 25%75% 11 Works Contract Service 50% 12 Security services 25%75%

62. POINTS TO PONDER

63. Issues –Invoice Is Service Provider required to state Service Tax payable by Service recipient under RCM in his Invoice ?

64. Quantum of service tax to be exhibited in the relevant Invoice/Bill/Challan  Service provider is required to comply with Rule 4A of Service Tax Rules, 1994.  According to Rule 4A(1) (iv) of Service Tax Rules, 1994 Service tax payable on the Description and value of Taxable Service provided or agreed to be provided is required to be exhibited in the invoice/bill/challan.  In the present context, Service tax payable means Service tax payable by the service provider. In fact, at Para 10.1.2 in the Guidance Note. It has been clarified that: “The service provider shall issue an invoice complying with Rule 4A of the ST rules. ……………….The ST payable would include service tax payable by the service provider”.  However, as a precautionary measure, the relevant Service provider [either at the request of service recipient or at his own discretion] may specify in invoice that service recipient is also under statutory obligation to deposit applicable percentage of Service tax payable by him directly to the credit of Central Government.

65. Proforma of Service Tax Invoice/Bill/Challan in case of works contract services M/s. ABC (Name, address & registration no. of Service Provider) Serial No……… Date : __/___/___ To XYZ Ltd (name & address of service Receiver) Sr. No. Description of Taxable ServicesValue of Taxable Services Total Amount Construction of new Residential Complex Service Rs. 10,00,000 (I)Service Tax @12% on 40% of value of Taxable service Rs. 48,000[service Tax payable by service Provider @50% of Rs. 48000] Rs. 24,000 (II)Primary education Cess @2% on Rs. 24000Rs. 480 (III)Secondary & Higher Education Cess @ 1% on Rs. 24000 Rs. 240 TOTALRs. 10,24,720 Please Note that Service Recipient is statutory required to deposit 50% of service tax accordance with provisions of Section 68(2) of Finance Act, 1994 read with Rule 2(1)(d) of service Tax Rules, 1994 i.e. Partial Reverse Charge Mechanism. Signature of Service Provider/ Authorized Signatory

66. Issue –Impact of threshold exemption XYZ Ltd has received a Bill in respect of works contract for Construction of Factory shed carried out by Mr. A for Rs.5,00,000 on 5th August,2012. In said Bill service tax was not charged by Mr. A as he was claiming basic exemption limit under Notification 33/2012 –dated 20.06.2012 Bill was paid by XYZ Ltd on 15th October,2012 XYZ Ltd claimed that there is no service tax liability as Mr.A was claiming basic exemption limit Whether XYZ Ltd is required to pay Service Tax under RCM ?

67. Impact of threshold exemption availed by the service provider A particular service provider may avail the benefit of threshold [small service provider] exemption limit of Rs. 10 Lakhs by virtue of Notification No. 33/2012-S.T., dated 20-6-2012 with effect from 1-7-2012. Question is whether same will absolve recipient also from its liability under Reverse Charge. Threshold exemption limit of Rs.10 lakhs is available under Notification No. 33/2012-ST. It contains a non-obstante clause which reads as: “Nothing contained in this Notification shall apply to: (i) ………………. (ii) 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 the service tax Rules, 1994.”

68. Impact of threshold exemption availed by the service provider Section 68(2) referred to in the above clause including makes service recipient liable to pay the tax in certain situations. Thus, the clarification answers that in both the situations, whether having full or partial liability, service tax is payable by the recipient irrespective of the threshold exemption availment by the provider. To say it differently, service recipient has to discharge its Service tax liability irrespective of the value of services as there is no monetary limit of exemption when Service tax liability is discharged under reverse charge mechanism.

69. Illustration Service Tax payable by service Provider (Mr.A) Service tax payable by service recipient (XYZ Ltd) Contract Value 5,00,000 Value of Sharing of Taxable Service 2,50,000 Taxable value The liability of the service provider is below the basic exemption limit of Rs. 10lakhs. 40% Service Tax Rate12.36% Respective Service Tax Payable 12,360

70. Point of Taxation for the Service Provider and Service recipient Timing aspect for the payment of Service Tax will have to be examined in both the cases from different perspective as per Point of Taxation Rules, 2011 a) Payment of Tax by Service Provider: CASESPOINT OF TAXATION Invoice is issued within 30 days from date of completion of service -Date of Invoice - Date of Receipt of payment Whichever is earlier Invoice is not issued within stipulated 30 days from the date of Receipt of Payment or Date of Completion of Service Date of completion of service

71. Point of Taxation for the Service Provider and Service recipient CASESPOINT OF TAXATION Payment of invoice is made by the service recipient within six months of the date of invoice. Date of payment to Service provider Payment is not paid within 6 months of date of invoice and date of invoice is issued within time limit Date of Invoice of Service provider Payment is not paid within 6 months of date of invoice and date of invoice is not issued within time limit Date of Completion of service b) Payment of Tax by Service Recipient:

72. POINT OF TAXATION IN REVERSE CHARGE MECHANISM FOR SERVICE RECIPIENT In case of advance payment Date of advance payment In case of payment is made after provision of service If payment is made within 6 months Date of such payment If payment is not made within 6 months If bill is issued within time limit Date of Bill/Invoice If bill is not issued within time limit from date of completion of service Date of completion of service

73. Point of Taxation for the Service recipient DATE OF INVOICE DATE OF PAYMENT POINT OF TAXATION (POT) REASON 12/3/201214/04/2012 Payment by Service Recipient is done within 6months and so POT is the date of payment 12/12/201215/06/201312/12/2012Payment is not made within 6months hence Date of Invoice is the POT. Also interest will be charged on the bill amount at the rate specified u/s 75 from POT to the date of payment i.e. from 05 th /6 th January,2013 to 15 th June,2013

74. Issues- Liability of SP & SR Service Provide has not availed exemption or abatement which is legally available and prepared the invoice without considering exemption or abatement. Can service recipient claim such exemption or abatement for payment of service tax under RCM? Proprietor ‘A’ is engaged in providing security service to M/s Z Ltd. A has charged service tax on entire amount of consideration charged for such service to Z Ltd. M/s Z Ltd. has paid the entire payment including service tax to A. The entire amount of service tax collected by A is deposited with Government. The department alleges that M/s Z Ltd. is liable to deposit service tax under reverse charge and accordingly issues a show cause notice to M/s Z Ltd. who has approached you for advice.

75. Liability of service provider and service recipient is independent of each other Service tax liability of service provider and service recipient is for respective specified amounts and is independent of each other. Accordingly, both are free to choose their own method for discharging their own specified share of service tax liability. Say, in case of Works Contract Services, in accordance with rule 2A (i) [i.e. Gross Amount Charged for the works contract less the value of property in goods transferred in the execution of the said works contract] of service tax (Determination of Value) Rules, 2006 and accordingly discharge his service Tax liability. On the other hand, the service Recipient may determine value of Works Contract Services in accordance with Rule 2A (ii) [ as per Standard deduction method] of Service Tax (Determination of Value) Rules, 2006.

76. Issues –CENVAT Credit Safe Ltd has recruited a Security Agency for security of its office premises and factories.It has received a Bill of Rs.1,00,000 /- from Security agency for services provided for the Month of June,2013. Safe Ltd has also availed services on which they have claimed CENVAT Credit and balance in CENVAT Credit as on 30.06.2013 is Rs.50000/- Can Safe Ltd. use CENVAT Credit balance of Rs.50000/- to pay service tax (Rs.9270/-) on security services ?

77. Mode of discharging liability by service recipient (Whether SR can pay from CENVAT Credit?) It may so happen that SR may be having unutilized CENVAT Credit. Whether the balance lying therein can be utilized for the payment to be made under Reverse Charge ? CENVAT Credit can be taken by provider of output service As per Explanation to Rule 3(4) of CCR provides that “CENVAT Credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient.” Therefore, Service Recipient has no option but to make payment of ST in cash in GAR-7 Challan and claim the same as CENVAT Credit thereafter (If otherwise eligible).

78. Issues –Transitionary Provisions Manpower supply service by an individual to a business entity registered as a body corporate is provided in the month of June, 2012 Bill dated 30-06-2012 was raised by service provider. The service receiver makes payment for the service on 15-07-2012 for this bill. Is the reverse charge mechanism applicable?

79. Applicability of partial reverse charge for services provided before 1-7-2012 Provisions of partial reverse charge have come into effect in respect of specified services with effect from 1-7-2012 by virtue of Notification No. 30/2012-S.T., dated 20-6-2012. However,for specified services if Point of Taxation is before 1-7-2012, then provisions of reverse charge will not apply. Circular No. 162/12/2012-S.T., dated 6-7-2012 also clarified that the provisions of partial reverse charge would be applicable in respect of such services where point of taxation is on or after 1-7-2012 under applicable rules in respect of the service provider. In short, for any service, where point of taxation is determined and liability is fastened prior to 01/07/2012 in terms of Point of Taxation Rules, 2011, the new provisions of reverse charge do not apply.

80. Transition….. Date of Completion of Service Date of Raising of Invoice Date of Payment Point of Taxation (POT) Reason Prior to 30 th June,2012 Date of Invoice/ Payment Reverse charge would not apply to the receiver for POT prior 30 th June, 2012 Date of Completion of Service Date of Raising of Invoice Date of Payment Point of Taxation (POT) Reason Prior to 30 th June,2012 On or after 01 st July,2012 (within 30 days) On or after 01 st July,2012 Date of Invoice/ Payment Reverse charge would apply to the receiver as POT is date of Invoice, which is on or after 01.07.2012

81. Availability of CENVAT credit for the service recipient Service Recipient can avail Cenvat credit,subject to satisfaction of relevant condition of CENVAT Credit Rules, 2004 as regards to Input Service under Partial Reverse Charge. CENVAT Credit can be availed for service tax charged by service provider in his Invoice (on Service provider`s share of taxable value) and also Service tax paid by him under reverse charge (on his share of taxable value).However point of eligibility of CENVAT is different.

82. Availability of CENVAT credit for the service recipient In respect of Service Tax Charged by service provider(SP) in Invoice : Credit of service tax paid to the service provider would be available on the basis of the invoice. However, subject to the condition that, SP makes payment of the value of input service and the service tax thereon within 3 months from date of invoice. In case, SP fails to pay service recipient within three months from date of invoice, - Pay/reverse equal to the CENVAT credit availed on such input service on the basis of Invoice - Reavail CENVAT credit whenever subsequently payment is made of value of input service and the service tax In respect of Service Tax paid by service recipient (SR) by Challan: The credit of service tax paid by SR under reverse charge would be available on the basis of tax payment GAR- 7 challan [ Rule 9(1)(e) of Cenvat Credit Rules, 2004] and after payment is made of the value of input service and the service tax.

83. Case Study : TMS Ltd. received a total Invoice of Rs. 26,23,600 from Mr. A on 10 th August,2012 in respect of Works Contract for Construction of Factory Shed. In the said bill, Rs. 25,00,000 was charged for services provided and Rs. 1,23,600 was charged as Service Tax by the contractor. The bill was paid on 15 th October,2012 by TMS Ltd. As an advisor to TMS Ltd,you are required to advice TMS Ltd about its service tax liability, if any.

84. Service Tax payable by service Provider Service tax payable by service recipient Contract Value 25,00,000 Value of Sharing of Taxable Service 12,50,000 Taxable value 40% Service Tax Rate 12.36% Respective Service Tax Payable 61,800 Date of completion of service 15 th July,2012 Date of Invoice of Mr.A 10th August,2012 Date of Payment to Mr.A 15th October,2012 Respective Service Tax to be paid on 5th September,20125th November,2012 CENVAT Credit to be taken by TMS Ltd (if otherwise eligible) For Rs.61,800/- Charged by Mr.A to be taken in the month of August,2012 on the basis of Invoice For Rs.61,800/- paid by TMS Ltd under reverse charge would be availed in the month of November,2012 on challan

85. Issues –Refund of CENVAT Pure Ltd is Trading concern,dealing in Chemicals an d Solvents. It has been receiving services such Security Service, Works Contract Service etc for the purpose of its business operations. Due to partial reverse charge, it has paid service tax as service receiver on such services and since CENVAT cannot be utilised,it wants to claim refund of CENVAT Credit. Whether refund can be claimed by Pure Limited ?

86. Refund of CENVAT credit to service provider providing services According to Rule 5B of cenvat credit Rules, 2004. If a provider of service providing services notified under section 68(2) is unable to utilizes the Cenvat credit availed on inputs and input services for payment of Services tax on such output services, he shall be allowed refund of such unutilized Cenvat credit subject to procedure, safeguards, conditions and limitations as may be specified. It is important that only that service provider is entitled to get refund of cenvat credit under above mentioned Rule 5B who is discharging service tax liability under Partial Reverse charge. Hence service provider who is discharging its Service Tax liability under Reverse charge cannot get refund to CENVAT credit under Rule 5B because statutory definition of term “output service” under Rule 2(p) of CENVAT Credit Rules, 2004 specifically excludes a service where the whole of service tax is liable to be paid by the recipient of service. Resultantly, his services cannot qualify as “output service” and he is debarred from taking the refund of CENVAT credit.

87. Refund of CENVAT credit to service provider providing services Rule 5B of CCR indicates that the refund would be available to service providers of services notified in section notified in section 68(2) and not to recipient liable under reverse charge. Hence,say the recipient corporate body of, say, works contracts services and manpower supply services is engaged in pure “trading activity” which is not liable for service tax, such trader cannot claim refund.

89. All birds find shelter during a rain. But Eagle avoids rain by flying above the Clouds. Problems are common, but Attitude makes the difference..!!