Changes in Reverse Charge Mechanism under Service Tax


1. Two new services are now covered in Reverse Charge Mechanism w.e.f. 11.07.2014.

a. Director of Body Corporate: Director service provided to body corporate is brought under reverse charge (earlier it was only for companies).

b. Recovery Agent Service: Recovery Agent service provided to Banks, Financial Institutions and NBFC is brought under reverse charge (100% Service Tax payable by service recipient).

2. The percentage of tax to be paid by Service Recipient and Service Provider has changed in case of Rent-a-cab Operator (which also include Radio Taxi or Radio Cab) w.e.f. 01.10.2014.

a. During the period 01.07.2012 to 30.09.2014: Service Tax payable on non-abated value by the Service Provider was 60% and Service Receiver is 40%.

b. During the period from 01.10.2014: Service Tax payable on non – abated value has changed to 50% in case of both Service Provider and Service Receiver.

[Notification No.30/2012-ST dated 20.06.2012 as amended by Notification No. 45/2012–ST dated 07.08.2012 has been further amended by Notification No. 10/2014– ST dated 11.07.2014]

3. The percentage of service portion in case of other works contracts including works contract, for maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property, has been increased from 60% of the gross amount charged to 70% w.e.f. 01.10.2014.

[Rule 2A of Service Tax (Determination of Value) Rules, 2006 as amended by Notification No. 11/2014-ST dated 11.07.2014.]

4. Time period for availing the credit of input service by the recipient of taxable service paying service tax under full and partial reverse charge w.e.f. 11.07.2014, is clearly specified now, as under:

a. In case of full reverse charge : the credit shall be allowed after the service tax is paid.

b. In case of partial reverse charge: the credit shall be allowed after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice.

[Rule 4(7) of Cenvat Credit Rules, 2004 as amended by Notification No. 21/2014-CE (N.T.) dated 11.07.2014]



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