In Partial Reverse Charge Both Provider And Receiver Pay Service Tax As Shown Below :
|
Name of Service |
% paid by Service Provider |
% Paid by Service receiver |
|
Works Contract Service |
50% Individual HUF Partnership firm AOP |
50% Body Corporate |
|
Renting of Motor Cab/Motor vehicle |
50% Individual HUF Partnership firm AOP |
50% Body Corporate |
|
Manpower Service (Security guard/labor/placement agency) |
25% Individual HUF Partnership firm AOP
|
75% Body Corporate |
Note
Now ful reverse charge on Manpower Service
Comparison Reverse Charge and Partial Reverse Charge
|
Reverse charge |
Partial reverse charge |
|
Service tax is paid by service receiver. |
Service tax is partly paid by service receiver and partly by service provider. |
|
Service receiver deposits service tax directly to the government. |
Some portion of service tax is paid by service provider to the government and some directly by service receiver. |
|
It is a rare case. |
It is a very rare case. |
Exam Questions
Question 6
Answer the following questions:
(i) Mr. T, an architect, hires a cab from Mr. S, who is engaged in the business of renting of
motor cabs. Value of services provided by Mr. S is Rs. 2,500. Mr. S avails CENVAT credit
on inputs and capital goods. Who is liable to pay service tax in this case?
Will your answer be different if RST Ltd., a manufacturing company, hires the cab from
Mr. S?
Also, compute the amount of service tax payable assuming that Mr. S is not eligible for
small service providers’ exemption.
Note: Mr. T, Mr. S and RST Ltd. are located in Mumbai and wherever applicable, service
tax has been charged separately.
View answer
(i) In case of renting of motor cabs, abatement of 60% from gross amount charged is
available if CENVAT credit on inputs, capital goods and input services, other than input
service of renting of motorcab, is not availed. Therefore, since in the given case, Mr. S
avails CENVAT credit on inputs and capital goods, it cannot pay service tax on abated
value.
In case of taxable services 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 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; both service provider and
service receiver are liable to pay service tax. 50% of tax is to be paid by service provider
and 50% by service receiver.
Since in the given case, service by way of renting of motor cabs is provided by an
individual (Mr. S) to another individual (Mr. T) and not to any body corporate, reverse
charge provisions will not apply and entire service tax will be payable by service provider
(Mr. S). Thus, service tax of Rs. 350 (14% of Rs. 2,500) is liable to be paid by Mr. S.
However, when motor cab is taken on rent by RST Ltd. (a company), reverse charge
provisions will apply and 50% of tax will be paid by Mr. S (service provider) and 50% by
RST Ltd. (service receiver). Thus, Mr. S will pay Rs. 175 and RST Ltd. will pay Rs. 175.