Service Tax Reverse charge mechanism with Latest Rate Chart

Service Tax Reverse charge mechanism – Complete Details. Hi Friends Find Complete Details for Service Tax Reverse charge mechanism. In this article You can find complete details for Service Tax Reverse charge mechanism like – What is Reverse charge mechanism, Applicability, Small Service Provider Exemption etc. Now you can scroll down below and check full details regarding “Service Tax Reverse charge mechanism – Complete Details”

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Service Tax Reverse charge mechanism

To understand what is a reverse charge mechanism in service tax first we need to be aware of normal service tax.

As per section 68(1) of the Finance Act, 1994, every person providing taxable services to any other person shall pay service tax at the rate specified in section 66. Normally, the liability to pay service tax lies with the service provider. He shall collect the service tax from the service recipients and thus pay it to the authorities.

Reverse charge mechanism was introduced in service tax with effect from 1/7/2012. With this, service receiver is also liable to file return and pay service tax in respect of service tax they have to collect and pay to the authority.

Applicability :

All service receivers are not liable to pay service tax under reverse charge. Only on receiving specific services , reverse charge mechanism will come into picture. Here I’m discussing some instances where Reverse charge mechanism will come into practice.

1. Services of goods transport agency :

Goods transport agency renders the service of transportation of goods by road by issuing a consignment note. Here the party paying the freight shall be the service recipient who shall be liable to pay service tax on such service.

2. Services of insurance agent:

Where an insurance agent provides services to an entity carrying on insurance business , that entity being a receiver of service is liable to pay service tax.

3. Works contract :

work contract is joint contract in which service is provided along with transfer of some material. Here the recipient of service should charge the service tax on the service provided by the other party at the rate applicable.

4. Services by government or local authority :

excluding postal services, insurance and other public utility services ,any life support services provided by government or local authority are also taxable as per this reverse charge mechanism and the full liability lies with service receivers.

5.Services by directors of company :

Under reverse charge mechanism services provided by directors are also attract service tax. Any payments made to non executive directors such as sitting fees etc. are taxable. And the company being a recipient of service should pay service tax on the service.

6. Renting motor vehicle :

Services by way of renting of cabs, cars and buses are included under this service. But it doesn’t include metered cab, public transport etc.

7. Supply of manpower :

Services by way of supplying manpower like supply of security manpower is covered under reverse charge mechanism.

Small service provider exemption :

Small service provider exemption is not available under reverse charge mechanism and service receiver has to register himself under reverse charge mechanism without considering liability of payment.

When to pay ? Point of taxation :

Under reverse charge Point of taxation shall be the date of payment to service provider. In case the payment is not made within 6 months of the issue of invoice, date of invoice shall be considered as the point of taxation.

Center credit availability. :

Service tax paid under reverse charge mechanism is available for cenvat credit if the service received is included in definition of input service.

Download Latest Service Tax – Reverse Charge Chart

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6 thoughts on “Service Tax Reverse charge mechanism with Latest Rate Chart”

  1. I am working as accounts in-charge for a leading eye hospital. Hiring Manpower from the last 2 yrs under RCM. What about now? Manpower has been removed under RCM. We have received invoices on the date of 30th June. whether to recognise RCM in this month or not? Kindly Guide me.

  2. If Indian Company Purchases a Technical Know – How or Technological Support from Overseas Parent company and pays fees for that. Service Tax under reverse charge will be applicable or not.

  3. Would as an Indian registered company like to raise invoice to a foreign entity in UK covering Cost of manpower services in India utilised for the foreign entity plus a mark up (an acceptable metholodogy under Transfer Pricing) under the same management.

    Should service Tax on RCM be applicable on the invoice (that we would like to raise covering cost plus mark up on cost)

  4. We are a Central Govt. organization engaged in Quality Control. We are registered with Service Tax and having Service Tax no. We are charging Service tax @ 14% + Swachh Bharat Cess 0.5% + Krishi Kalyan Cess @ 0.5% = 15% on our Testing Charges and after that the same tax deposited by this deptt..
    There is a case came to my knowledge that National Freight Corridor informed us that they have deducted the 100% Service Tax and the same deducted tax will be deposited by them.

    Pl clarify whether is it under Rules or not.

    • Mr A. Siddiqui, as per rules
      50 : 50 can be shared between the provider and receiver OR
      100% by service provider.

      Thus NFC may charge entire ST and you may use it as Input Credit.
      For additional information email me –

    • I am service tax collect from party for building Purpose and tax paid to govt. department. If I paid service tax to Restaurant or personal building maintenance, then I can be service tax input credit for this tax paid??????


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