The following persons are liable to pay service tax –
1. Service provider liable to pay service tax [section 68(1)]:
According to section 68 any person providing taxable services to any person shall pay service tax at the rate specified in section 66B in such manner and within such period as may be prescribed.
2. Service receiver liable to pay service tax [reverse change mechanism ](section 68{2}) :
In respect of certain notified taxable service by central government ,the service tax thereon shall be paid by the service receiver in such manner as may be prescribed and all the provision of the act shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
The service notified under this category and the person liable to pay service tax thereon are exhibited in the table below [ rule 2(1)(d) of service tax rule 1994 ] :
| In relation to service provided or agreed to be provided by – | Service provided (i.e. service receiver) | Person liable to pay service tax |
| An insurance agent | To any person carrying on the insurance business. | The recipient of such service |
| A goods transport agency in respect of transportation of goods by road. | Where the person liable to pay freight is-· Any registered factory; · Any registered society; · Any co-operative society; · Any registered dealer; · Any body corporate established, by or under any law; or · Any partnership firm whether registered or not under any law including association of persons. |
Any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in good carriage.Exception: if such person is located in non –taxable territory ,than the service provider is liable to pay service tax. |
| Way of sponsorship. | To anybody corporate or partnership firm located in the taxable territory. | The recipient of such service. |
| An arbitral tribunal or an individual advocate or a firm of advocates by way of legal services, | To any business entity located in the taxable territory. | The recipient of such service |
| A director of the company or body corporate | To the said company or the body corporate | The recipient of such service. |
| Any person which is located in a non taxable territory | To any person located in the taxable territory | The recipient of such service |
| A recovery agent | To a banking company or a financial institution or a non banking financial institution. | The recipient of such service |
| Government or local authority by way of support services except –· Renting of immovable property ,and ·Services specified in sub clauses (i) (ii) and (iii) of clause (a) of section 66D of the finance act 1994. |
To any business entity located in the taxable territory. | The recipient of such service. |
3. Service to be paid partly by service provider and partly by service receiver under partial reverse charge mechanism : the central government may notify the service and the extand of service tax which shall be payable by the service receiver and the provision of this chapter shall apply to him to the extend so specified and the remaining part of the service tax shall be paid by service provider .
The service notified under this category and the extent of service tax payable thereon by the person who provides the service and the person who receives the service for the taxable services shall be as specified in the following table [notification no . 30/2012-ST, dated 20-6-2012 :
CHANGES BY THE FINANCE ACT 2015 IN THE REVERSE CHARGE MECHANISM
Manpower supply and security services when provided by an individual, HUF, or partnership firm to a body corporate are being brought to full reverse charge. Presently, these are taxed under partial reverse charge mechanism.
Services provided by mutual fund agents, mutual fund distributors and agents of lottery distributor are being brought under reverse charge consequent to withdrawal of the exemption on such services. Accordingly, Service Tax in respect of mutual fund agents and mutual fund distributors services shall be paid by assets management company or, as the case may be, by the mutual fund receiving such services. In respect of sub-agents of lottery, Service Tax shall be paid by the distributoror selling agent of lottery.
4. Point of taxation for the service recipient : according to rule 7 of point of taxation rules, 2011, the point of taxation in respect of person required to pay tax as recipient of service shall be date on which payment is made provided payment of invoice is made by the service recipient within 3 month from the date of invoice.
If the payment of invoice is not made by the service recipient within 3 month from the date of invoice , than point of taxation shall be date immediately following the said period of 3 months.
5. Mode of calculating assessable value of services received by the service recipient :service recipient is required to discharge its service tax liability on the basis of payment made by it to the service provider . further ,out of pocket expenses incurred or reimbursed by service recipient to the service provider are also required to be included in the assessable value of relevant services .
6. Liability of service provider and service recipient is independent of each other: service tax liability of service provider and service recipient is for respective specified amounts, totally independent and different from each other .accordingly ,both are free to choose their own method for discharging their own specified share of service tax liability.
7. Impact of threshold /small service provider exemption availed by the service provider on the service tax liability of the service recipient : the benefit of threshold exemption is not available to a service recipient. In other words, service recipient has to discharge its service tax liability irrespective of the value of the value of services as there is no monetary limit of exemption when service tax liability is discharged under reverse charge mechanism.
8. Mode of discharging service tax liability by service recipient in respect covered under partial reverse charge and utilization of cenvat credit : service recipient of specified service listed herein before is required to discharge his service tax liability in cash . service recipient can avail cenvat credit in respect of the service tax paid by it under partial reverse charge and also of the amount of service provider as he has borne the incidence of tax.
9. Refund of cenvat credit to service provider providing services taxed on partial reverse charge : service provider is entitled to get refund of cenvat credit under rule 5B of the cenvat credit rules ,2004, who is discharging service tax liability under partial reverse charge . service provider who is discharging its service tax liability under reverse charge cannot get refund of cenvat credit under foregoing rule 5B because statutory definition of term “output service “ under rule 2(p) of cenvat credit rule ,2004 specifically excludes a service where the whole of the service tax is liable to be paid by the recipient of service. Resultantly, his services cannot qualify as “output service” and he is debarred from taking the refund of cenvat credit.