1. Presents
Master Class
On
Understanding Service Tax Law Nuances
Conducted by
Dr. Sanjiv Agarwal
FCA, FCS
Monday,
16th December, 2013
@ Mumbai
© Dr. Sanjiv Agarwal
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2. •
Every person providing taxable service (service provider) shall pay tax @ 12.36% ,
to be collected in prescribed manner. [section 68(1)]
•
Service recipient is a person liable to pay service tax in certain cases [section 68
(2)]
•
Defined in rule 2(1)(d) of Service Tax Rules, 1994 and 2(m) of POP Rules, 2012
•
Person liable to pay service tax u/s 68 read with rule 2(1)(d) of ST Rules, 1994
•
Persons liable

Service provider

Specified service receivers [Rule 2(1)(d)(i)(A to G)]

Importer of service
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3. In case of services covered under Section 68(2) read with 2(1)(d)
Service
Liable to pay service tax
Insurance agent
Service Recipient (i.e. Insurance company)
GTA
Specified persons
In other case
Person liable to pay fright
GTA
Sponsorship service to body corporate / firm
Recipient of service
Arbitral tribunal / individual advocate/ firm of advocate
Recipient of service
Support service to Govt. / local authority subject to other
conditions
Recipient of service
Director‟s services to Companies
Recipient of service (i.e. Company )
Rent-a-cab service subject to other conditions
Recipient of service
Supply of manpower service subject to other conditions
Recipient of service
Works contract service subject to other conditions
Recipient of service
Services provided from non-taxable territory to any person in
taxable territory
Recipient of service
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4. •
Every person who is liable to pay service tax shall take registration
under service tax as per section 69 of Finance Act, 1994
•
Service recipient shall obtain registration under service tax as
recipient of service, pay service tax and file return
•
Assessees who have to take registration

Service provider who has provided a taxable services of value
exceeding Rs. 9 lakhs in the preceding financial year

Service receiver liable to pay service tax under reverse charge
mechanism u/s 68(2) / rule 2(1)(d)

Input service distributor

Importer of service being person liable u/s 68(2)
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5. Service tax payment - different
scenarios
Service provider pays service
tax
Service receiver pays service
tax
Both service provider and
service receiver pay service
tax
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6. •
Normally, service tax is payable by person who provides the service
•
Section 68(2) makes provision for reverse charge i.e. making person
receiving the service liable to pay tax
•
Authority for reverse charge u/s 68(2) of Finance Act, 1994
•
Person liable to pay tax – Rule 2(1)(d) of Service Tax Rules, 1994
•
W.e.f. 1.7.2012, a new scheme of taxation is applicable whereby the
liability of payment of service tax shall be both on the service provider and
the service recipient (Notification No. 30/2012-ST, dated 20.6.2012 )
•
The extent to which tax liability has to be discharged by the service
receiver is specified in Notification No. 30/2012-ST dated 20.6.2012.
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7. Under Partial Reverse Charge (Proportional / Joint)
•
•
•
Renting of motor vehicles
Manpower supply & security services
Works contracts
Under Full Reverse Charge (100%)
• Insurance related services by agents
• Goods Transportation By Road
• Sponsorship
• Arbitral tribunals
• Legal services
• Company 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 territory.
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8. •
Liabilities of both the service provider and service
receiver are statutory and independent of each other
•
Liability cannot be shifted by mutual agreement
•
Reverse charge will not apply where the service
receiver is located in non-taxable territory
•
Reverse charge shall not be applicable if provider of
service was liable before 1.7.2012
•
Service Tax will not be payable by service receiver
under reverse charge, if service was provided prior to
1.7.2012, even if payment is made after 30.06.2012
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9. •
Credit of tax paid can be availed by service recipient if it is input service for him
•
The credit of tax paid by the service recipient under partial reverse charge would be
available on the basis on the tax payment challan (but invoice required)
•
Service provider under RCM may claim refund of tax paid under rule 5(b) of
CCR, 2004
•
Service Tax under reverse charge to be paid within 6 months on actual payment (Rule
7 of POT Rules, 2011)
•
Small scale benefit is available only to service provider (not to service receiver), if
entitled
•
Service receiver under reverse charge cannot avail exemption of Rs. 10 lakh under
Notification No. 33/2012-ST dated 20.06.2012
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10. •
Valuation of services by services provider and service receiver can be on
different principles, if permitted by law (e.g. works contract - Refer
Notification No. 30/2012-ST, explanation II)
•
Invoice to be prepared as per Rule 4A of Service Tax Rules, 1994
•
It is a statutory obligation (not contractual) on the service recipient to pay
Service Tax, whether under full or proportional reverse charge
•
Service Tax under reverse charge has to be paid only by cash vide GAR Challan
No. 7 and it cannot be paid by way of utilization of Cenvat Credit.
•
Once paid, Cenvat credit can be taken for paying eligible input service
•
Service receiver liable only for his portion
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11. •
In respect of manpower supply and security services,
works contract services and renting of motor vehicles
to carry passenger, reverse charge shall be applicable
only when following two conditions are satisfied –
•
•
service receiver is a business entity registered as a body
corporate, and
service provider is any one of the following entities –




Individual
Hindu undivided family (HUF)
Firm (including limited liability partnerships)
Association of persons
If both the above conditions are not satisfied in
respect of these three services, Service Tax shall be
payable by the service provider in ordinary course.
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12. Service Provider
Service Receiver
Individual /HUF/
Partnership firm
/AOP
Business entity –
body corporate
Joint
Individual /HUF/
Partnership firm
/AOP
Individual /HUF/
partnership firm
/AOP
100 % by service
provider
Business entity – Individual /HUF/
Body Corporate / Partnership firm
Company
/AOP
100 % by service
provider
Business entity –
Body Corporate
100 % by service
provider
Business entity –
Body Corporate
Service Tax Payable
by
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13. •
For three specified services provided by business entities being
company, society, co-operative society, trust etc, reverse charge
will not apply.
•
Reverse charge will also not apply where the service recipient is
any person or business entity not being a body corporate in case
of three specified services
•
“Business Entity” means any person ordinarily carrying out any activity
relating to industry, commerce or any other business or profession
•
“Body Corporate” means the meaning assigned to in clause (7) of Section
2 of the Companies Act, 1956 and section 2(11) of 2013 Act.
•
Company , corporation and LLP are „body corporate‟
•
Firm, HUF, Trust and Co-operative society are not „body corporate‟
•
But firm includes LLP for Service Tax
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14. Sr. No
Description of Service
Service
Provider
Service
Receiver
1.
Services
provided
by
an
insurance agent to any person
carrying on insurance business
Nil
100%
2.
Services provided by a goods
transport agency in respect
of transportation of goods by
road
Nil
100%
3.
Services provided by way of
sponsorship
Nil
100%
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15. Sr. No Description of Service
Service
provider
Service receiver
4.
Services provided by an arbitral
tribunal
Nil
100%
5.
Services provided by individual
advocate or a firm of advocates by way
of legal services
Nil
100%
5A.
in respect of services provided or
agreed to be provided by a director of
a company to the said company ( w.e.f
7.08.2012)
Nil
100%
6.
Services provided by Government or
local authority by way of support
services excluding,1) renting of immovable property,
2) postal services
3) transport of goods / passengers
4) air craft or vessel
Nil
100%
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16. Sr.
No
Description of Service
7.
Hiring of Motor Vehicle
(a) renting of a motor vehicle
designed to carry passengers on
abated value to any person not
engaged in the similar line of
business
(b) renting of a motor vehicle
designed to carry passengers on
non abated value to any person
who is not engaged in the similar
line of business
8.
Services provided by way of supply
of manpower for any purpose or
security services (w.e.f 07.08.2012)
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Service
provider
Service receiver
Nil
100 %
60%
40%
25%
75 %
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17. Sr.
No
Description of Service
9.
Services
provided in service
portion in execution of works
contract
10.
Services provided by any person
who is located in a non-taxable
territory and received by any
person located in the taxable
territory
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Service
provider
Service receiver
50%
50%
Nil
100%
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18. Director’s Services
•
Vide entry No. 5A of N. No. 30/2012 as amended by N. No. 45 and
46/2012
•
Service tax is payable under reverse charge by companies
who
receive services from their directors who are not in employment
•
Sitting fees, commission, bonus, etc. are subject to service tax
•
WTDs /MDs /EDs who are under contractual employment with the
company and receive salary or remuneration from the company will
not be covered - considered as employees of the company
•
Director can be appointed either in an individual capacity or as a
nominee for company , association or any other entity including
Government.
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19. Director’s Services
•
Interest on loan by director to company, dividend on shares, other
professional charges on account of services not rendered as a director
(in professional capacity) are not liable to Service Tax
•
In case of nominee director, the nominating company who receives fees
will be liable to pay service tax
•
The invoice / receipt to be issued by the directors within 30 days
•
In case of nominee directors, the
invoice will be issued by the
nominating company
•
In the case of Government nominees, the services shall be deemed to
be provided by the Government but liable to be taxed under reverse
charge basis
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20. Particulars
Position upto 6.8.2012
Position w.e.f. 7.8.2012
Individual
To be registered and pay
Director in his service tax
individual
capacity
Service tax paid by the
company
Nominee
Director
Paid by the nominee
director‟s company
Paid by the nominee
director‟s company
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21. Manpower Supply Services

Service is manpower supply service if under command
of principal employer

Cleaning service, piece basis / job basis contract is not
manpower supply service

Service tax will be applicable on salary plus PF, ESI,
commission of labour contractor and other charges

Employees sent on deputation are also covered under
manpower supply services
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22. Security Services

Security services means services relating to the
security
of
any
property,
whether
movable
or
immovable, or of any person, in any manner and
includes the services of investigation, detection or
verification, of any fact or activity

CA services are not security services

Distinction between manpower supply & security
services
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23. Rent-a-cab Service
•
In case of renting of motor vehicles to carry passengers
where abatement is also available, reverse charge basis is
proportional depending upon the abatement on the
condition that no Cenvat Credit has been availed. The
service provider should provide a certificate, either in the
invoice itself or separately.
•
In case of renting of motor vehicle to carry passengers,
reverse charge applies only where service receiver is not
engaged in same business.
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24. Rent-a-cab Service
•
Reverse charge
will be applicable when
renting to a person who is not in similar line
of business
•
Service receiver will pay on 40% in every case
whether abatement is claimed or not
•
No Cenvat credit (not an input service)
•
Cost to company
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25. Goods Transport Service
•
Service tax liability arise when consignment note
is issued
•
GTA will be liable to pay tax only when both
service
provider
and
service
receiver
are
individuals
•
Tax on 25% (abated value), if GTA does not avail
Cenvat Credit, otherwise tax on 100% value
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26. Legal Services
Service Provider
Service Receiver
Individual Advocate / Firm / LLP
Business entity with turnover > Rs
10 lakhs in preceding financial year
Arbitral Tribunal
Business entity with turnover > Rs
10 lakh in previous financial year
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27. Works Contract Services
Original works i.e. new
construction, all types of
addition & alteration and
erection, commissioning or
installation
of
PM/Equipment etc .
Taxable Amount = 40% of
the Total Amount Charged
ST = (40*12.36%)*50% =
2.472
Maintenance or repairs
or
reconditioning
or
restoration or servicing of
goods e.g. AMC
Taxable Amount = 70% of
the Total Amount Charged
ST = (70*12.36%)*50% =
4.326
Maintenance,
repairs,
completion & finishing
service such as glazing,
plastering, floor and wall
tiling etc. e.g. interior
decoration
Taxable Amount = 60% of
the total amount
charged
ST = (60*12.36%)*50% =
3.708
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28. Services provided by Government / local authority
•
Reverse charge applicable to all services except specified services
•
Government Department needs to
be registered and pay tax on
support services of 

Speed post, express parcel, life insurance.

Transport of goods and/ or passengers

•
Renting of immovable properties
Services in relation to vessel or aircraft
Services to be provided to any business entity located in taxable
territory
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29. Additional information suggested on the invoice –
•
Amount of Service Tax based on his share of Service Tax liability, if any,
(which service recipient is required to pay to the service provider) - in
case of joint or proportionate reverse charge liability.
•
Fact that entire amount of Service Tax on the invoice is payable by the
service recipient under reverse charge (if so).
•
Invoice amount is inclusive / exclusive of applicable Service Tax.
•
Alternatively, in case of proportionate reverse charge, service provider
should charge Service Tax only on that part of the invoice for which he
is liable to pay and wants to recover from the service recipient and
mention that balance amount is payable by the service recipient.
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30. THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur / Delhi
asandco@gmail.com
sanjivservicetax@gmail.com
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