In most of the cases, service provider, i.e. person who is providing taxable service is liable to pay service tax.
However, in few cases, exceptions have been made and service receiver is made liable to pay service tax. Theprovision that service receiver is liable to pay service tax is termed as ‘Reverse Charge’. The exceptions are asfollows –
4.2.10 Services provided to non-resident– In relation to taxable service provided or to be provided by any person from a country other than India and received by any person under section 66A of Finance Act, service tax is payable by recipient of service [Rule 2(1)(d)(iv)]
4.2.11 Services of insurance agents – In case of insurance auxiliary service by an insurance agent, the tax will be payable by insurance company (general insurance or life insurance as the case may be). The insurance agent is not liable to register and pay tax. [However, the insurance agent is not entitled to avail exemption available to a small service provider].
4.2.12 Consignor/consignee paying freight, in case of GTA services – In case of services of Goods Transport Agency (GTA), service tax is payable by consignor/consignee who is paying freight [rule 2(1)(d)(v)] [However, the consignor/consignee is not entitled to avail exemption available to a small service provider].
4.2.13 Services of Agents of mutual fund – In case of distributors/agents of mutual funds, the liability will be on the recipient of service, namely, mutual funds [Rule 2(1)(vi)] [However, the mutual fund agent is not entitled to avail exemption available to a small service provider].
4.2.14 Body corporate or firm located in India receiving sponsorship service – In case of Sponsorship service provided to a body corporate or firm located in India, the body corporate or firm receiving such sponsors hipservice will be liable to pay service tax [rule 2(1)(d)(vii) inserted w.e.f. 1- 5-2006 and amended w.e.f. 1-4-2007]. If the recipient of sponsorship service is located outside India, service tax is required to be paid by the service provider and not by the recipient.
4.2.15 Cenvat credit of tax paid – The Body corporate or firm paying such service tax will be eligible to avail Cenvat credit of the service tax paid, on the basis of TR-6/GAR-7 challan by which the tax is paid [Rule 9(1)(e) of Cenvat Credit Rules, as amended w.e.f. 1-5-2006]. It may be noted that when person receiving service is liable to pay service tax, he is not entitled to exemption which is available to a small service provider.
4.2.16 Large Taxpayer Unit (LTU) – A concept of LTU has been introduced for large taxpayers of direct taxes and indirect taxes. In case of service tax, Large Taxpayer has meaning assigned to it in Central Excise Rules [rule 2(cccc) of Service Tax Rules]. LTU has started functioning in Bangalore w.e.f. 1-10-2006.
4.2.17 Service on sub-contract basis
CBE&C vide circular No. 999.03/23.8.07 has clarified that a sub-contractor is also a taxable service provider. His services are taxable even if these are used by main provider for completion of his work. The sub-contractor is liable even if the service is input service of the main contractor and main contractor is paying service tax on entire value of contract.