SERVICE TAX LIABILITY OF ROYALTY

[RAM SHARMA]

Dear Experts,

We have made provision  from 1.1.2012 to 31.03.2012 on Service Tax of Royalty @10% under reverse charge machenism and payment made to foreign in may 2012. As per finance bill 2012 the rate of service tax is 12% from 1.4.2012. Now  i am confuse what will be the rate of charged either it is 10% or 12% for service receiver under reverse charge machenism beacuse service tax liability should be payment basis. Pl clerify.

Thanks 

AI Summary

Service Tax on Royalty Payments: 12.36% Rate Applies Post-April 1, 2012, per CBEC Circular and Section 66A. A query was raised regarding the applicable service tax rate on royalty payments under the reverse charge mechanism, specifically whether the rate should be 10% or 12% for payments made in May 2012. Two responses clarified that, according to CBEC Circular No. 158/9/2012 and Section 66A of the Finance Act, 1994, the applicable service tax rate is 12.36% for payments made on or after April 1, 2012. The provisions recorded in the books of account prior to this date are not relevant in determining the applicable tax rate.