Services under 100% RCM

[Amresh kumar]

Respected Kasturi Sir,

According to Notfn 30/2012-ST dated 20.06.2012

Sr No 2. 100% Services Tax is to be paid by the recipient i.e.Banking company/Financial Institution/ NBFC if the service provider is recovery agent.

Mu point is whether the recovery Agent appointed by telecommunication company i,e Reliance. Air-Tel etc who are engaged for collecting bills & from defaulted customer will also cum under RCM or there is special mention about it.

Thanks & regards

Amresh Kumar

[KASTURI SETHI]

Sh.Amresh Kumar Ji,

For correct answer, you will have to peruse erstwhile definition of Recovery Agent Service under Section 65(105)(zzzl) of Finance Act, 1994 along with Notification No.10/14-ST dated 11.7.14 which amends original Notification No.30/12-ST dated 20.6.12

(i) Recovery Agent Service was defined under Section 65((105)(zzzl) of the Finance Act as follows :

"to a banking company or a financial institution including a non-banking financial company or any other body corporate or a firm, by any person, in relation to recovery of any sums due to such banking company or financial institution, including a non-banking financial company, or any other body corporate or a firm, in any manner;"

(ii) Notification No.10/14-ST dated 11.7.14 (Recovery Agent Service was brought under RCM)

“(ia) provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company;”;

If you compare both above Section and Notification, you will find that only highlighted portion has been brought under RCM. Remaining part of definition of Recovery Agent Service is not covered/included under RCM.Therefore, you can easily arrive at the correct and concrete conclusion that in the given scenario Recovery Agent Service of Airtel/Jio Reliance etc. are not covered under RCM. Here Recovery Agent Service falls under FCM and NOT under RCM.

Moreover, both these companies are body corporate and these cannot be treated as Banking Company, Financial Institution or NBFC. Body corporate has been excluded from RCM for Recovery Agent Services.

[KASTURI SETHI]

Duties and functions mentioned by you refer to 'Collecting Agent Service ' and Not 'Recovery Agent service'. There is a great gulf between both services.

AI Summary

Reverse charge mechanism does not apply to recovery agents collecting for non-financial corporates; such services remain under forward charge. The notification amendment narrowed RCM coverage to recovery agent services provided to banking companies, financial institutions or non-banking financial companies. Recovery agents engaged by telecommunications companies, which are ordinary body corporates, therefore do not fall within the RCM provision and their services remain subject to the forward charge mechanism. The functions of collecting agent service are distinct from Recovery Agent Service and do not bring such agents within the RCM scope.