REVERSE CHARAGE MECHANISM

[DR.MARIAPPAN GOVINDARAJAN]

The telecom service provider is collecting telephone bills from the subscribers. In addition to this the postal department is also collecting telephone bills on behalf of the telecom service provider. For this the post office collects Rs.10/- per commission per bill. For this commission service tax is liable to be paid. The doubt is whether such service tax is payable by the post office, the service provider or the telecom service receiver under the Reverse Charge Mechanism. The views of the experts are solicited.

[YAGAY andSUN]

Services provided by Government, RBI, Diplomatic Missions are duly mentioned under Negative list and are exempted from the purview of service tax.

[Mahir S]

Taxation Guide – Guidance Note – 4 – Exemptions dated 20.06.2012)

4.1.10 Department of Posts provides a number of services. What is the status of those services for the purpose of levy of service tax?

As per sub-clause (i) of clause (a) of section 66D services provided by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services carried out on payment of commission on non government business are excluded from the negative list. Therefore, the following services provided by Department of Posts are not liable to service tax.

  ♦  Basic mail services known as postal services such as post card, inland letter, book post, registered post provided exclusively by the Department of Posts to meet the universal postal obligations.

  ♦  Transfer of money through money orders, operation of savings accounts, issue of postal orders, pension payments and other such services.

4.1.11 Would agency or intermediary services on commission basis (distribution of mutual funds, bonds, passport applications, collection of telephone and electricity bills), which are provided by the Department of Posts to non-government entities be liable to service tax?

YES. Agency services carried out on payment of commission on non-government business are excluded from the negative list entry relating to services provided by Government or a local authority.”

[DR.MARIAPPAN GOVINDARAJAN]

Thank you for your advices.

AI Summary

Agency services taxation: Department of Posts' commission-based bill collection is liable to service tax by negative-list exclusion. The query asks whether service tax on the post office's commission for collecting telephone bills should be paid by the post office, the telecom provider, or the receiver under Reverse Charge. Replies state government services are generally in the negative list and exempt, but agency services by the Department of Posts on payment of commission for non government business are excluded from the negative list and hence liable to service tax; the text does not expressly resolve who bears tax under Reverse Charge.