SERVICES UNDER REVERSE CHARGE UNDER GST REGIME

The concept of reverse charge was introduced in the service tax regime vide Notification No. 30/2012, dated 20.06.2012 and came into effect from 20.06.2012.

Under reverse charge, the recipient of service is to pay the tax to the credit of the Central Government.  The reverse charge is of two types – Full reverse charge and partial reverse charge.   Under the full reverse charge, the service recipient is to pay 100% of the tax on the value of services received by him.  Under partial reverse charge, the service recipient is to pay certain percentage of tax on the value of taxable service and the balance amount is to be payable by the service provider.

The Notification No. 30/2012 has met many amendments and as on date the following services come under the net of reverse charge mechanism-

• in respect of  services  provided or agreed to be provided  by an insurance agent to any person carrying on insurance business – 100%;
• in respect of 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 – 100%;
• in respect of services provided or agreed to be provided by a selling or marketing agent of lottery tickets in relation to lottery in any manner to a lottery distributor or selling agent of the State Government under the provisions of the Lottery (Regulations) Act, 1998 (17 of 1998)- 100%;
• in respect of  services  provided or agreed to be provided  by a goods transport agency in respect of transportation  of goods by road – 100%;
• in respect of  services  provided or agreed to be provided  by way of sponsorship – 100%;
• in respect of  services  provided or agreed to be provided  by an arbitral tribunal – 100%;
• in respect of services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly
• in respect of  services  provided or agreed to be provided  by Government or local authorityexcluding,- 

(1) renting of immovable property, and

(2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994 – 100%;

•  in respect of  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 – 100%;
• n respect of  services  provided or agreed to be provided  by way of supply of manpower for any purposeor security services – 100%;
• in respect of  any taxable services  provided or agreed to be provided  by any person who is located in a non-taxable territory and received by any person located in the taxable territory other than non-assessee online recipient– 100%;
• n respect of any service provided or agreed to be provided by a person involving an aggregator in any manner – 100%;
• in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India – 100%;

Under partial reverse charge

•  in respect of  services  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 – service provider – 50% and service receiver – 50%;
• n respect of  services  provided or agreed to be provided  in service portion in execution  of works contract – service provider – 50% and the service receiver – 50%;

Reverse charge under GST

Section 2(98) of the CGST Act defines the expression ‘reverse charge’ as the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under section 9(3) or (4) or under section 5(3) or (4) of Integrated Goods and Services Tax Act, 2017.

Chapter V of Finance Act, 1994 applies the reverse charge only to the services received by the recipient of services.  But the GST Act makes the reverse charge applicable to  both services and goods.

The provisions of the Act and the rules made there under applicable to the service provider are also applicable to the service recipient under reverse charge mechanism.  In this Act it is provided that the service recipient, who receives services or goods from the unregistered person, is liable to pay service tax under reverse charge mechanism and for this purpose he is to raise an invoice.

Services coming under Reverse charge under GST

Under the provisions of GST there is no partial reverse charge mechanism.  The GST Council in its 14^th Council meeting held on 19.05.2017 approved the list of services coming under reverse change mechanism.   Nearly 12 services are coming under reverse charge mechanism.  The service recipients in all these case are liable to pay the entire tax (no partial reverse charge mechanism).  The following table gives the list of services coming under the reverse charge mechanism, who is the service provider who is the service recipient liable to pay the tax under this scheme @ 100%

The above list is subject to changes.