Service tax notification 15/2012
R S Jadeja
(Querist) 15 August 2012
This query is : Resolved
According to the notification men power suppliers are to claim and pay 25 % of service tax as provider of service. Does Security service Providers come in this category?
Tajobsindia
(Expert) 16 August 2012
Security service has been defined under Notification No. 46 - 2012 - ST as follows: “security services” means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity.
Nature of servcie - Services by a Security Agency to the said company
% of ST payable by service Provider - 25%
% of ST payable by service Recipient - 75%
Liability to pay service tax under reverse charge arises when service provider and service receiver are from any of the following categories: Service Provider Service Receiver, Individual Body Corporate, as defined under Companies Act, 1956 (for Proprietorship firm definition refer next query), Partnership firm, HUF, AOP. In other cases, liability to pay service tax would be on service provider.
M V Gupta
(Expert) 16 August 2012
Mr. Tajobs, Please clarify whether Individuals are liable to pay service tax at 75% for services received from the security service provider.
Tajobsindia
(Expert) 16 August 2012
Mr. Gupta,
Government has amended Notification No. 30/2012-ST dated 20.06.2012, to notify the service provided by a director to the Company as a service for which Service Tax has to be paid by somebody other than the service provider as stipulated in Section 68(2) of the Finance Act 1994. The extent of tax payable by the recipient is also notified as 100%.
This means that for the services provided by a Director to the Company, the entire tax payable has to be paid by the Company.
Now this notification amending Notification No. 30/2012 - ST, was issued on 07.08.2012. The service by Director to the Company was taxable from 1st July 2012 and till 6th August 2012, there was no "reverse charge mechanism"
So, for the payment received by the Director for July, he has to pay the tax and for the six days in August also, he has to pay the tax. From 7th August, the Company will pay the tax!!! All the Directors have to obtain registration for payment of service tax for one month 6 days, file ST 3 and then surrender the registrations probably only after auditing their accounts for correctness of payment.
BY the same Notification Government has amended Notification No. 30/2012-ST bringing Security services also under "Reverse Charge."
Now the Security Agency has to pay 25% and service recipient has to pay 75%.
But there is a strange problem here which indirectly you brough to notice. As per the Notification, security services by any individual, Hindu Undivided Family or 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 is only covered under the "Reverse Charge Mechanism"
So, if a "Security Service Agency" is providing the service to a person other than a body corporate, the "reverse charge mechanism" will not apply.
That means up to and inclusive of 6th August, the service provider is liable to pay on full Service tax, from 7th August, he is liable to pay 25% of service tax and a Body Corporate has to pay 75% service tax. If the service provider has already issued invoice on 6th August and payment is received after 7th August, the service provider is liable to pay full service tax. Instead of making things complex for the taxpayers, one can argue why can't they amend the Notifications from 1st day of any month? FM is anyway not losing revenue, as it is only a "distribution of liability between the service provider and the recipients". - Right or wrong Mr. Gupta ?
CONSEQUENTLY, the “person liable for paying Service Tax”, under Rule 2(1)(d) of the Service Tax Rules, has been amended to include the service provided by Director and ‘security services' under the "reverse charge".
Let me also end this query by adding that "Reverse Charge Mechanism" is going to be a nightmare to "service receivers" as there are so many services which will end up needing "further clarification" such as employee taking say Radio taxi service / or Xerox of papers from outsource Shop as service / Say a employee send overseas for 1 month / Three Wheeler as conveyence taken by individual and this is a service so who will pay service tax while claiming reimbursements - right or wrong Mr. Gupta?.
M V Gupta
(Expert) 17 August 2012
Dear Mr. Tajobs,I am grateful for the detailed clarifications. Does not the amendment reduce the liability of service receiver to 75% instead of 100% in the case of corporates? Because the service tax is chargeable to the customer in full as sales tax is. So the amendment is to the advantage of the corporates,whereas individuals are continued to be burdened with reimbursement of entire tax to the service providr. If what I have stated above is correct, then the answer for your doubts will boil down to this - the individual receiving the various services mentioned in the last para of ur posting will be liable to reimburse to the service provider in full.
Inder Kumar Kamra
(Expert) 17 August 2012
Mr Gupta, individual service receiver is not covered under reverse charge. Service Tax on Security services provided to individual to be paid provider himself.
