REVERSE CHARGE – Prescribed persons to pay service tax :

When service tax is paid by service receiver it is known as reverse charge. Payment of service tax under reverse charge is effected in two ways – one where entire service tax is payable by the service receiver and the other where only a part of service tax is payable by the service receiver and the remaining part is payable by the service provider. The first one is referred to as full reverse charge and the latter as partial reverse charge.

Further, any other person may also be made liable to pay service tax e.g. an aggregator.

Section 68(2) empowers Central Government to notify taxable services in respect of which, service tax shall be paid by prescribed persons in the prescribed manner. Further, the extent of service tax which shall be payable by such person may also be notified and the provisions of service tax law shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.

In pursuance of this power, the Central Government has issued Notification No. 30/2012 dated 20.06.2012 which provides as follows:

SERVICES WHERE ENTIRE SERVICE TAX IS PAYABLE BY ANY PERSON LIABLE FOR PAYING SERVICE TAX [OTHER THAN SERVICE PROVIDER]: –

1. Insurance agent’s services: The taxable services provided or agreed to be provided by an insurance agent to any person carrying on the insurance business;

2. Goods transport agency‟s services: The taxable services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road, where the person liable to pay freight is,—

(a) any factory registered under or governed by the Factories Act, 1948.

(b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India.

(c) any co-operative society established by or under any law.

(d) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 or the rules made thereunder.

(e) any body corporate established, by or under any law, or

(f) any partnership firm whether registered or not under any law including association of persons.

Note: The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

3. Sponsorship services: The taxable services provided or agreed to be provided by way of sponsorship to anybody corporate or partnership firm located in the taxable territory.

4. Legal services: The taxable services provided or agreed to be provided to any business entity located in the taxable territory by,-

(a) an arbitral tribunal, or

(b) an individual advocate or a firm of advocates by way of legal services.

Note: Services provided to a business entity by an arbitral tribunal or by an individual advocate or a firm of advocates by way of legal services are exempt from service tax provided the turnover of such business entity in the preceding financial year does not exceed Rs 10 lakh.

5. Support services by Government: The taxable services provided or agreed to be provided to any business entity located in the taxable territory by Government or local authority by way of support services excluding,-

(i) renting of immovable property, and

(ii) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994.

6. Renting of a motor vehicle: The taxable services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business by any individual/HUF/partnership firm (whether registered or not) including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory.

7. Services provided by a person located in non-taxable territory: The taxable services provided or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory.

8. Director’s services: The taxable services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate.

9. Recovery agent’s services: The taxable services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company.

10. Supply of manpower services: The taxable services provided or agreed to be provided by way of supply of manpower for any purpose by any individual/HUF/partnership firm (whether registered or not) including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory.

11. Security services: The taxable services provided or agreed to be provided by way of security services by any individual/HUF/partnership firm (whether registered or not) including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory.

12. Mutual fund agent/distributor’s services: The taxable services provided or agreed to be provided by a mutual fund agent or distributor, to a mutual fund or asset management company.

13. Lottery selling or marketing agent’s services: The taxable services provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent.

14. Services involving an aggregator: The taxable services provided or agreed to be provided by a person involving an aggregator in any manner.

The word ‘aggregate’ literally means a whole formed by combining several elements or a combination of many separate items or units. The aggregator is one, who therefore aggregates or causes aggregation of units, items, things or services.

There are also many online websites that follow ‘aggregator’ model. Under this model, an entity collects or aggregates information on a particular service from
several sources on a single platform and draws customers to its platform to connect them with the service provider. It may also facilitate the customers in comparing the prices and specifications of a particular service offered by multiple service providers.

Therefore, companies which act as aggregator for service providers like travel portals, food portals or cab services will now be liable to pay service tax.

SERVICES WHERE SERVICE TAX IS PARTIALLY PAYABLE BY SERVICE PROVIDER AND PARTIALLY BY ANY PERSON LIABLE FOR PAYING SERVICE TAX [OTHER THAN SERVICE PROVIDER]:

S.No.	Service provided by any individual/ HUF/ partnership firm (whether registered or not) including association of persons, located in taxable territory to a business entity registered as body corporate, located in the taxable territory	% of service tax payable by the service provider	% of service tax payable by any person liable for paying service tax (other than service provider)
1	provided or agreed to be provided by way of 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	50%	50%
2	provided or agreed to be provided in service portion in execution of works contract*	50%	50%

*Note: In works contract services, where both service provider and service receiver are the persons liable to pay tax, service receiver has the option of choosing the valuation method as per choice, independent valuation method adopted by the service provider.