service tax under reverse charge - government services

[hubert fernandes]

Hi, As per Union Budget 2016 -17, Any services provided by Govt. to business entity will be liable to service tax under RCM. Is services of electricity, telecom & water by govt. ie. BSNL, MSEB and water bill from municipality liable to service tax under reverse charge?

[KASTURI SETHI]

Pl. note the words 'TO BUSINESS ENTITY". It means service provided to individual is not taxable. Also note the definition of 'Govt.' or 'Local Authority. BSNL and MSEB are not fully Government. Municipal Corporation or Committee falls under the definition of 'Local Authority'. There are exemptions and exceptions also. Clear picture will emerge after enactment. The possibility of further change or amendment cannot be ruled out.

[Ganeshan Kalyani]

Service means any activity carried out by one person for another for consideration.

Will supply of electricity be not a sale. The charges are levied based on the unit consumption. Nothing is performed by the provider of electricity but has only supplied the electricity. Can you share your views. Thanks.

AI Summary

Reverse charge on government-provided services may extend to supplies to business entities, subject to exclusions and exemptions. Reverse charge liability from the Union Budget 2016-17 subjects services provided by the government to a business entity to service tax under RCM, while excluding services to individuals; municipal bodies qualify as local authorities, entities like BSNL and MSEB may not be wholly government, and specified exemptions and exceptions apply. The note questions whether supplies such as electricity-billed by unit consumption-are sales rather than services, affecting their susceptibility to service tax under reverse charge until enactment clarifies scope.