With effect from 01.07.2012, the central government has notified the new partial reverse charge mechanism for the payment of service tax in respect of certain taxable services. Under this, a portion of Service tax is payable by Service Receiver who satisfy certain requirements. Security Agency is one such service where partial reverse charge is applicable.
Service provided by Security agency* in relation to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity.
*“Security agency” means any person engaged in the business of rendering services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity, whether of a personal nature or otherwise, including the services of providing security personnel.
ABATEMENT – NOTIFICATION NO. 45/2012
- Under Reverse charge mechanism if Service is provided by individual/Firm/HUF/AOP to a body corporate registered under Companies Act, 1956 and/ or Companies Act, 2013 to the extent applicable, then Service Provider shall pay service tax to the extent of 25% and Service Receiver has to pay to the extent of 75%. In all other cases, Service Provider has to pay 100% service tax.
- Service Receiver (Body corporate) cannot take the benefit of Small Services Provider exemption (Notification no. 33/2012). However, this exemption shall continue to be applicable to Service Provider.
- Service Receiver cannot utilize the available Cenvat Credit for paying service tax under reverse charge.
- Service Receiver (Body corporate) can take the Cenvat credit of entire Service Tax paid ( by Service Provider + Service Receiver under reverse charge mechanism) on the basis of invoice issued by Security Agency and challan through which Service Tax has been deposited.
- In invoice, Service Provider shall mention the bill amount and the Service Tax applicable to SP + SR and also divide the Service Tax in the invoice proportionately.
- The Service Receiver shall deduct TDS at applicable rate on total bill ( Bill amount + S.Tax amount applicable to SP) and make payment to Service Provider.
Liability to pay service tax:-
In case of Service Provider: – At time of Issue of Invoice
whichever is earlier.
In case of Service Receiver: – At the time of payment to Service Provider