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Relevant Notifications:-  Notification no. 30/2012 dated 26.06.2012 later updated by notification no. 45/2012 dated 07.08.2012 w.e.f. 01/07/2012

Dual System of Service Tax Payment
A.   For certain services, service recipients needs to pay 100% Service Tax – 9 Services
B. For certain services, both service recipients & service providers are liable to pay partial service tax.
1.    25-75% Category – 2 Services
2.    50-50% Category – 1 Service
3.    60-40% Category- 1 Service 

A. Services where the service recipients needs to pay 100% Service Tax:-  
1.    Insurance Agents:-  Service provided to any person carrying on insurance business.
2.    Transportation of goods by road:-  Services provided by goods transport AGENCY to factory, society, co-operative society, dealer, body corporate, partnership firm, association of persons.
3.    Sponsorship:-  By any person to anybody corporate, or partnership firm located in taxable territory.
4.    Arbitral Tribunal:- By an arbitral tribunal to any business entity located in taxable territory.
5.    Legal Service:- By an individual advocate or a firm of advocates to any business entity located in taxable territory.
6.    Support Service:- By govt. or local authority to any person. 
7.    Renting/hiring of any motor vehicle designed to carry passengers on Abated Value:-By any Individual/HUF/Partnership Firm, Proprietary firm, AOP to any company/body corporate located in taxable territory.
8.    Director:- By director to the company.
9.    From non-taxable territory to taxable territory:- Any taxable service provided by any person located in the non-taxable territory to any person located in the taxable territory.

B. Services where both service receiver & service provider are partially liable to pay service tax:- 
1.   25-75% Category:- (Service Receiver on 75%, Service Provider on 25%)
a. Supply of Manpower:- By any Individual/HUF/Partnership Firm, Proprietary firm, AOP to any company/body corporate.  
b. Security Service:- By any Individual/HUF/Partnership Firm, Proprietary firm, AOP to any company/body corporate.
2.  50-50% Category:-
a. Works Contract:- By any Individual/HUF/Partnership Firm, Proprietary firm, AOP to any company/body corporate.
3.  60-40% Category:- :- (Service Receiver on 40%, Service Provider on 60%)
a. Renting/hiring of any motor vehicle designed to carry passengers on Non- Abated Value:- By any Individual/HUF/Partnership Firm, Proprietary firm, AOP to any company/body corporate.
*Very important point to note is that, liability to partially pay the service tax under Reverse Charge Mechanism is applicable only where the services are provided only to Body Corporates. Further if services are provided by the body corporates, then it would not be covered.

IMPORTANT POINTS:-
1.    Registration & Returns
o    Service recipients will have to apply for service tax registration & consequently needs to file service tax returns.
o    Threshold exemption limit of Rs.10 lakh is not applicable.
o    If a registered person is also liable to pay service tax as service receiver, he needs to get his service tax registration amended by getting service receiver added.
o    It will be the responsibility of the service receiver to determine the correct nature of service.

2.    Invoice & Service Tax Credit
o    Only proportionate service tax should be mentioned on the invoice.
o    Under the Partial Reverse Charge Mechanism “the service tax payable thereon” needs to be indicated on the invoice by the service provided.
o    Cenvat credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient. Therefore, service receiver has no option but to make payment of service tax in cash.


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