Friday 8 June 2012

NEW SERVICES UNDER REVERSE CHARGE IN SERVICE TAX WEF 01.07.2012

The Central Government vide Notification No. 19/2012-ST dated 05.06.2012 has announced Date of Introduction of new regime of most awaited Negative List approach in Service Tax, which will apply w.e.f. 01.07.2012 i.e. service tax would be applicable on all services except those mentioned either in the Negative List or in the Mega Exemption vide Notification No. 12/2012-ST dated 17.03.2012.

Reverse Charge in service tax is not a new concept. Under this scheme, service tax is payable by service recipient instead of service provider and in some cases service tax is partly paid by service recipient and party by service provider at the percentage prescribed in Act. Under this charge service receiver has to register himself under service tax. Further service receiver can not claim general exemption limit of Rs. 10 Lcs. So he has to pay even on few rupees of service received.

It will be very harsh on service receiver end where he has received services falls under this charge for only few hundred rupees but due to it he has to register himself in service tax and have to file service tax return on prescribed interval. Moreover under service tax act Nil return is also mandatory and every registered person have to file half yearly return.

The extent of service tax payable by the person who receives the service and the person who provides the service for the specified taxable services shall be as under:
Sl.No.
Description of a service
Percentage of  service tax payable by the person providing service
Percentage of service tax payable by the person receiving the service
1
in respect of  services  provided or agreed to be provided  by an insurance agent to any person carrying on insurance business
Nil
100%
2
in respect of  services  provided or agreed to be provided  by a goods transport agency in respect of transportation  of goods by road
Nil
100%
3
in respect of  services  provided or agreed to be provided  by way of sponsorship
Nil
100%
4
in respect of  services  provided or agreed to be provided  by an arbitral tribunal
Nil
100%
5
in respect of  services  provided or agreed to be provided  by individual advocate
Nil
100%
6
in respect of  services  provided or agreed to be provided  by way of support service by Government or local authority
Nil
100%
7
(a)   in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on abated value.
(b)   in respect of  services  provided or agreed to be provided  by way of renting or hiring any motor vehicle designed to carry passenger on non abated value.
Nil




60%
100 %




40%
8.
in respect of  services  provided or agreed to be provided  by way of supply of manpower for any purpose
25%
75 %
9.
in respect of  services  provided or agreed to be provided  by way of works contract
50%
50%
10
in respect of  any taxable services  provided or agreed to be provided  by any person who is located in a non-taxable territory and received by any person located in the taxable territory(IMPORT OF SERVICES)
Nil
100%

the Following new Sections have been inserted for governing the Service Tax Legislature:-
1.         Section 65B – Definitions/ Interpretation of various Terms.
2.         Section 66B – Charge of Service Tax -  -  This is the new charging section of service tax. This section seeks to levy service tax at the rate of 12% on the value of all services, except services specified in the negativelist (in section 66D). These services would be chargeable to tax if these are provided by any person to any person.
3.         Section 66C – Determination of Place of Provision of Service – This seeks to empower the Central Government to make rules which will contain principles on the basis of which taxing jurisdiction of a service can be determined. These rules would be known as Place of Provision of Services Rules, 2012. From 01.07.2012, these rules come into effect, existing ‘Export of Services Rules, 2005’ and ‘Taxation of Services (Provided from outside India and received in India) Rules, 2006’ will be rescinded.
4.         Section 66D- Negative list of Services  -  This seeks to specify  the  list  of  such services which will be outside the ambit of service tax.
5.         Section 66E – Declared services   to charge service tax on service portion of 9 specified Deemed Sale.
7.         Changes in reverse charge mechanism vide Notification No.15/2012-Service Tax dated 17.03.2012 & Changes in abatement rates vide Notification no. 13/2012-ST dated 17.03.2012 à effective from 1st July 2012.
8.         Mega Exemption Notification vide Notification No. 12/2012-ST dated 17.03.2012  effective from 1st July 2012.
9.         Valuation for works Contract Services vide Notification no. 11/2012-ST dated 17.03.2012  effective from 1stJuly 2012.
Certain provisions under the old Sections will cease to operate from 01.07.2012 vide Notification no. 20/2012-ST,21/2012-ST 22/2012-ST and 23/2012-ST dated 05.06.2012:-
1.         Section 65 – Definition of Taxable Service
2.         Section 65A – Classification of Taxable service
3.         Section 66 -Charge of Section Tax

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