1. Reverse Charge mechanism and partial reverse charge mechanism

2. What is RCM Every person providing taxable service to any person is liable to pay service tax. Hence the liability to pay service tax is on the service provider. However an exception to the above said rule has been provided under sub section (2) of 68 of the Act., in terms of which the central government has the powers to notify services in respect of which even the service receiver shall be liable to pay service tax wholly or partially. This is termed as REVERSE CHARGE MECHANISM.

3. Notification 30/2012-ST dated 20th June, 2012 has been issued which supersedes Notification 36/2004-ST dated 31st December, 2004 for the purpose of determining the service tax payable by recipient of service and in some specific cases by both the provider and recipient of the services. Notification 30/2012-ST dated 20th June, 2012 is applicable for the services provided on or after 1 st July, 2012.

4. List of Services under RCM and Partial RCM S. No.Description of Services Provided By Provided To% of ST payable by Provider % of ST payable by Receiver 1Insurance Auxiliary Service Insurance Agent Person carrying on Insurance business NIL100% 2Sponsorship Service By any service provider Body Corporate or Partnership firm NIL100%

5. S. No. Description of Services Provided By Provided To % of ST payable by Provider % of ST payable by Receiver 3Transport of goods by Road Good Transport Agency Consignor or consignee in organized sector NIL100% 4Legal ServiceArbitral Tribunal Business Entity NIL100% 5Legal ServiceIndividual advocate or firm of advocates Business Entity NIL100%

6. S. No.Description of Services Provided ByProvided To% of ST payable by Provider % of ST payable by Receiver 6Support Service by Government or local authority Government or Local Authority Business Entity NIL100% 7Any ServicePerson in Non Taxable territory Person in Taxable Territory NIL100% 8Any Taxable Service Independent director of the company CompanyNIL100%

7. S. No.Description of Services Provided By Provided To% of ST payable by Provider % of ST payable by Receiver 9Renting or hiring of motor vehicle to carry passenger on abated value. (60% abatement Individual, HUF, Firm, AOP, BOI Business Entity registered as body corporate NIL100% (i.e. 40% of liability) 10Renting or hiring of motor vehicle to carry passenger on non abated value Individual, HUF, Firm, AOP, BOI Business Entity registered as body corporate 60%40%

8. S. No.Description of Services Provided ByProvided To% of ST payable by Provider % of ST payable by Receiver 11Supply of Manpower Individual, HUF, Firm, AOP, BOI Business Entity registered as body corporate 25%75% 12Security Service Individual, HUF, Firm, AOP, BOI Business Entity registered as body corporate 25%75% 13Work Contract Service Individual, HUF, Firm, AOP, BOI Business Entity registered as body corporate 50%

9. Payment Of Tax Under Reverse Charge Mechanism : Where Service tax is payable under reverse charge mechanism, it is required to be paid in cash only. In other words benefit of Cenvat cannot be availed for discharging the service tax liability on reverse charge mechanism.

10. Threshold exemption of Upto Rs.10 Lac is not applicable By Virtue Of notification 33/2012, the aggregate value of taxable services upto Rs. 10lacs has been exempted from service Tax., However, it has been provided that the benefit of the threshold exemption is not applicable to those cases where the service tax is payable under reverse charge mechanism

11. By following the above procedure, a service receiver could keep a track and ensure that it is compliant with the provisions of Service Tax under reverse charge. Also, in order to avoid the hassles of registering under Service Tax and making Service Tax payments, companies are now trying to appoint services providers which are either private / public limited companies so that they would not be liable to Service Tax as service recipients Conclusion:

12. . Adopting such an approach will directly affect the business of small service providers and for them the reverse / joint charge has and will continue to become an obstacle from their growth / expansion perspective. With respect to liability on account of import of service and payment of directors’ fees in certain specified instances, there are instances where traders in goods are facing problems as the same would be an additional cost to such traders in absence of output liability. It is hoped that the government will look into the hardships of service receivers and provide more simplified mechanism to discharge the service tax liability.