reverse charge mechanism

[Ganeshan Kalyani]

Hi,

i would like to discuss with reference to issue discussed in 108569 regarding service tax on rent-a-cab service.

with reference to Notification 26/2012 & 30/2012 the liability of service tax on - 1) abated value - service provider -NIL, service recipient -100% . 2) non-abated value - service provider -50%, service recipient -50%.

the point no. 2) above i.e. service tax liability on non-abated value is crystal clear. however, point no. 1 is a matter of discussion. if the value if abated then, as per Notification no.26/2012, the liability is 40% (60%abatement) on the condition that cenvat credit on input, capital goods and input service is not availed. it means if value is abated then liability is 40%. and Notification 30/2012 provides that service provider liability is NIL and recipient liability is 100%. Here, if we read both notification put together, then it is inferred that this 100% would mean only 40%. it means if value is abated then provider liability is NIL and recipient has to pay service tax on 40% of value of service. this mostly goes into confusion by user and for safer side, assessee tends to pay 100% service tax.

Request experts to present your valuable inputs in this regard.

AI Summary

Reverse charge on abated services requires recipient to pay tax on the taxable portion remaining after abatement.
Reverse charge liability for rent a cab services depends on whether the service provider avails the 60% abatement (forfeiting cenvat credit); if abatement is availed the recipient's reverse charge duty applies to the taxable abated base, whereas if the provider does not take abatement and claims cenvat credit the liability is determined on the non abated value under the notifications. Invoices should expressly state when abatement has been availed so the receiver can calculate reverse charge correctly.