Budget 2015 – Service tax – New chart for Abatement & Reverse Charge

 

We know that the rate of abatement and applicability of RCM (Reverse Charge Mechanism) play an important role while making payment of service tax to vendor and payment of service tax under RCM. In the article we have compiled all the provisions and notifications applicable for Abatement on service tax and Reverse charge mechanism. It would be beneficial for all those who are dealing with processing of vendor bills in relation to service tax and is liable to pay service tax under RCM. 

The provisions relating to abatement is tabulated below:

In case abatement is applicable then the service tax is not payable on the whole amount of bill. Say for example in case of GTA (goods Transport Agency) the taxable rate is 25% (i.e 75% abatement is allowed). So in such a case if GTA bill is of Rs 1,00,000 then the applicable service tax would be 12.36% of (25% of 1,00,000) i.e Rs 3,090.

Abatement Rate chart under Service tax

S.N	Service	Taxable	Effective rate as on date	Change in Budget 2015	Condition for service provider
1	Goods Transport Agency (GTA) (any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage) Provided that when such person is located in a non-taxable territory, the provider of such service shall be liable to pay service tax.	25%	3.090%	30% - 4.2	No cenvat credit availed
2	Transport of goods by rail	30%	3.708%	30% - 4.2	Nil
3	Transport of passengers by rail	30%	3.708%	30%  - 4.2	Nil
4	Transport of goods in a vessel from one port in India to another	50%	6.180%	30% - 4.2	No cenvat credit availed
5a	Transport of passengers by air - economy	40%	4.944%	5.6	Cenvat credit on inputs and CG is not availed
5b	Transport of passengers by air – business class	40%	4.944%	60% - 8.4	Cenvat credit on inputs and CG is not availed
6	Supply of food or any other article of human consumption or any drink, in a restaurant / other premises	40%	4.944%	5.6	Cenvat credit of goods in Ch. 1 to 22 not taken. Further, Rule 6 reversal  required
7	Supply of food in convention centre, pandal, shamiana etc	70%	8.652%	9.8	Cenvat credit of goods in Ch. 1 to 22 not taken. Further, Rule 6 reversal  required
8	Accommodation in hotels, inns etc	60%	7.416%	8.4	Cenvat credit on inputs and CG is not availed
9	Renting of any motor vehicle designed to carry passengers	40%	4.944%	5.6	No cenvat credit availed
10	Package tour	25%	3.090%	3.5	No cenvat credit availed. Bill incl. of charges for tour
11	Booking accommodation	10%	1.236%	1.4	-No cenvat credit availed - Bill indicates so - NA if invoice only for service charges
12	Services other than 11 and 12 provided in relation to tour	40%	4.944%	5.6	-No cenvat credit availed - Invoice is for gross amount
13	Financial leasing services including hire purchase	10%	1.236%	1.4	Nil
14	Services in relation to chit	70%	8.652%	100% - 14	No cenvat credit availed
15	Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, except where entire consideration is received after issuance of completion certificate by the competent authority,- (a) for a residential unit satisfying both the following conditions, namely:– (i) the carpet area of the unit is less than 2000 square feet; and (ii) the amount charged for the unit is less than rupees one crore; (b) for other than the (a) above	a) 25% b) 30%	a) 3.09% b) 3.708%	3.5 4.2	(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004; (ii) The value of land is included in the amount charged from the service receiver.
16	Works contracts entered into for execution of original works	40%	4.944%	5.6	Cenvat credit on inputs not availed
17	Works contracts entered into for maintenance or repair or reconditioning or restoration or servicing of any goods	70%	8.652%	9.8	Cenvat credit on inputs not availed
18	For other works contracts, not covered under sr. no. 16 and 17 , including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property	60%	7.416%	8.4	Cenvat credit on inputs not availed

 The provisions relating to RCM (Reverse Charge Mechanism) is tabulated below:

In case of Reverse Charge mechanism the service receiver is either required to pay the whole amount of service tax or part of the amount of service tax. Say for example in case of works contract the service recipient is required to pay 50% of the amount of service tax. Again in case of Original works the taxable portion is 40% only. So if the total amount of bill before service tax is Rs 1,00,000 then the service recipient is required to pay Rs 1,00,000*12.36%*40%*50% = Rs 2,472 as service tax under RCM and Rs 2,472 is required to be paid by vendor.

 

RATES OF SERVICE TAX FOR SERVICE PROVIDER AND RECEIVER UNDER REVERSE CHARGE MECHANISM

S.N	Service	Service Recipient	% of Service tax payable
			Provider	Recipient	Provider	Recipient
			Before	Budget	After	Budget
1	Provided by person who is located in non-taxable territory and received by any person located in taxable territory (In case of foreign services and services from J&K)	Any person	Nil	100%	Nil	100%
2	Works contract services by individual, HUF, firm or AOP	Body corporate	50%	50%	50%	50%
3	Manpower supply for any purposes or security services by individual, HUF, firm or AOP	Body corporate	25%	75%	Nil	100%
4	Renting of vehicle to any person who is not engaged in the similar line of business to carry passenger by individual, HUF, firm or AOP – With abatement – Without abatement	Body corporate	Nil (With Abatement) 60% (Without Abatement)	100% (With Abatement) 40% (Without Abatement)	Nil (With Abatement) 60% (Without Abatement)	100% (With Abatement) 40% (Without Abatement)
5	Support services by Government and Local Authority (excluding renting and 66D (a) (i) to (iii)	Business Entity	Nil	100%	Nil	100%
6	Provided or agreed to be provided by a director of a company to the said company (w.e.f. 7 August 2012 vide Not. 45/2012)	Body corporate	Nil	100%	Nil	100%
7	Individual advocate	Business entity	Nil	100%	Nil	100%
8	Arbitral Tribunal	Business entity	Nil	100%	Nil	100%
9	Sponsorship	Body corporate or Partnership Firm	Nil	100%	Nil	100%
10	GTA (Goods Transport Agency)	Company, P. Firm, Factory, Society, excise registered assessee	Nil	100%	Nil	100%
11	Insurance agent to insurance companies	Insurance business	Nil	100%	Nil	100%
11A	Recovery Agent Service	Recovery Agent	Nil	100%	Nil	100%
12	Services provided by a mutual fund agent/distributor, to a mutual fund or asset management company	Any person	Nil	Nil	Nil	100%
13	Service provided by a selling/marketing agent of lottery tickets to a lottery distributor or selling agent	Any person	Nil	Nil	Nil	100%
14	Services provided by a person involving an aggregator in any manner	Any person	Nil	Nil	Nil	100%