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what is reverse charge mechanism?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Pankaj MehrA asked over 3 years ago

what is reverse charge? which services cover under reverse charge mechanism and taxability procedure?

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8 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

Dear Friend, Under Reverse charge mechanism , the liability to pay service tax is of person receiving the service , i.e. service receiver , generally the service provider collects the service tax from receiver and deposit it to the account of government , however under Reverse charge mechanism service receiver himself deposit the service tax to government account . There are two types of Reverse charge mechanism : 1. Fully Reverse Charge mechanism : - Under this mechanism 100% liability of payment of service tax is borne by service receiver. Services which are covered under Fully Reverse Charge are : - Sponsorship service , Insurance agents services , goods transport agency services etc. However there are some conditions to be met before being covered under this category . 2. Partial Reverse Charge mechanism :- Under this mechanism the liability of payment of service tax is borne both by service receiver and service provider in the prescribed ratio. Like for example service of Renting of a motor cab designed to carry passengers etc.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered almost 3 years ago

Generally Service Tax is paid by Service provider. But in Reverse Charge mechanism, Service receiver is liable to pay Service Tax. Works Contract, Legal fees, Man Power Recruitment, Directors Sitting fees, etc These are few examples where service tax is paid by receiver of service. Tax is paid in the same way like how it is paid by service provider.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered almost 3 years ago

Generally Service Tax is paid by Service provider. But in Reverse Charge mechanism, Service receiver is liable to pay Service Tax. Works Contract, Legal fees, Man Power Recruitment, Directors Sitting fees, etc These are few examples where service tax is paid by receiver of service.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Manoj answered over 3 years ago

Hello, In Service Tax, as per normal rule Service Tax is paid by the Service Provider. However in some cases, it is no possible for the Service Tax Department to collect Service Tax on service received from outside India. For this purpose Reverse Charge Mechanism was introduced in Service Tax. Reverse Charge Mechanism mean Service Receiver is required to pay the Service Tax on the service received by him from the service provider. There are two type of Reverse Charge Mechanism. Firstly is Partial Reverse Charge in which both Service Provider & Service Receiver is required to pay service tax in some proportion it is specified in the notification. For e.g Man power recuritment service, Goods Transport Agency etc, Whereas other is Full Reverse Charge in which full service tax amount is payable by the Service receiver & he also not eligible for the Input credit of such payment under it. For eg. Legal Service of Advocate received by business entity, works Contract, etc.

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Open uri20170510 32134 ng4pv?1494421709 SONIYA answered over 3 years ago

Under **Reverse charge mechanism** , the liability to pay service tax is of person receiving the service , i.e. service receiver , generally the service provider collects the service tax from receiver and deposit it to the account of government , however under **Reverse charge mechanism** service receiver himself deposit the service tax to government account . There are two types of **Reverse charge mechanism** : 1. Fully Reverse Charge mechanism : - Under this mechanism 100% liability of payment of service tax is borne by service receiver. Services which are covered under Fully Reverse Charge are : - Sponsorship service , Insurance agents services , goods transport agency services etc. However there are some conditions to be met before being covered under this category . 2. Partial Reverse Charge mechanism :- Under this mechanism the liability of payment of service tax is borne both by service receiver and service provider in the prescribed ratio. Like for example service of Renting of a motor cab designed to carry passengers etc.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered over 3 years ago

As per section 68(1) of the Finance Act, 1994, every person providing taxable services to any other person shall pay service tax at rate specified in section 66. But In Reverse Charge Mechanism (RCM) the service recipient shall be made liable to pay the service tax. RCM covers Both Partial Reverse Charge & Full Reverse Charge. Applicability of RCM/PRCM is dependent on the status & location of Service Receiver (SR) and Service Provider (SP) and taxability of service. RCM does not apply on non-taxable and exempted services but applies on abated services and where value is determined by valuation rules.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 chetna answered over 3 years ago

Service tax is tax on Service. Generally Service Tax is paid by Service provider. But in Reverse Charge mechanism, Service receiver is liable to pay Service Tax. Works Contract, Legal fees, Man Power Recruitment, Directors Sitting fees, etc These are few examples where service tax is paid by receiver of service. Tax is paid in the same way like how it is paid by service provider. You have many services which is taxable on the basis of reverse charge and for many abatement are also available. To know in detail you need to tell about which service you want to know.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Karuna answered over 3 years ago

under the reverse charge , the service receiver is liable to pay the service tax on services received. some of examples , which falls in this category , like - supply of man power (security services), legal services (advocates) , work contracts etc

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