Payment of Service tax under Reverse Charge

[M C Rawat]

By Combined reading of Notification No. 30/2012-ST dated 20.06.2012 applicable from 01.07.2012 and Notification No. 45/2012-ST dated 07.08.2012 applicable from 07.08.2012

1. The taxable services,_

(i)....

(ii)....

(iii)....

(iv)....

(v) provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers to any person who is not in the similar line of business or supply of manpower or security service for any purpose or service portion in execution of works contract 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;

From the above it is clear that liability for payment of service tax under joint charge on security services arises when the following conditions are satisfied:

1. Service provided is of Security Services.

2. Service Provider is Individual, HUF, AOP, Partnership Firms

3. Service Recipient is a Body Corporate i.e. public limited or private limited company.

Ours is a Charitable Trust registered under Section 12 A(A) of the Income Tax Act. We are providing convention services, collecting service tax from the users of facilities and paying the same. We have engaged a Contractor, who provides security services to us.

Please clarify whether Service Tax under reverse charge is payable by us in respect of Security Services being availed by us? And if so, whether we can avail this payment under Cenvat Credit ?

[Rajagopalan Ranganathan]

Gentlemen,

The contractor who is providing the security service is an individual. Bur the service receiver is an AOP registered under Income Tax Act, as a trust. Since you are not a Body corporate, you are not bound to pay service tax under RCM. The full liability is on the contractor.

[YAGAY andSUN]

Dear Rawat,

In addition to above reply, you can avail the CENVAT credit if you are providing any output services and after adherence with the provisions as mentioned in CENVAT credit Rules,2004 as amended from time to time. The contractor would charge ST from you while raising the bill on you.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

AI Summary

Reverse charge on security services applies only if recipient is a body corporate; trust not liable, provider bears tax. Reverse charge for security services applies only when the service is provided by an individual/HUF/AOP/partnership and the recipient is a body corporate; a charitable trust registered as an AOP is not a body corporate and thus does not owe reverse charge-liability rests on the individual contractor. The trust may claim CENVAT credit if it provides taxable output services and satisfies CENVAT Credit Rules conditions.