Reverse Charge Mechanism and Abatement Rate Chart Under Service Tax

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. No.
Service
Taxable
Effective rate as on date
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%
No cenvat credit availed
2
Transport of goods by rail
30%
3.708%
Nil
3
Transport of passengers by rail
30%
3.708%
Nil
4
Transport of goods in a vessel from one port in
India to another
50%
6.180%
No cenvat credit availed
5
Transport of passengers by air
40%
4.944%
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%
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%
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%
Cenvat credit on inputs and CG is not availed
9
Renting of any motor vehicle designed to carry
passengers
40%
4.944%
No cenvat credit availed
10
Package tour
25%
3.090%
No cenvat credit availed.
Bill incl. of charges for tour
11
Booking accommodation
10%
1.236%
 -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%
 -No cenvat credit availed
– Invoice is for gross amount
13
Financial leasing services including hire purchase
10%
1.236%
Nil
14
Services in relation to chit
70%
8.652%
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%
(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%
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%
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%
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. No.
Service
Service Recipient
% of Service Tax payable
Provider
Recipient
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%
2
Works contract services by individual, HUF, firm or
AOP
Body corporate
50%
50%
3
Manpower supply for any purposes or security
services by individual, HUF, firm or AOP
Body corporate
25%
75%
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)
5
Support services by Government and Local Authority
(excluding renting and 66D (a) (i) to (iii)
Business Entity
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%
7
Individual advocate
Business entity
Nil
100%
8
Arbitral Tribunal
Business entity
Nil
100%
9
Sponsorship
Body corporate or Partnership
Firm
Nil
100%
10
GTA (Goods Transport Agency)
Company, P. Firm, Factory,
Society, excise registered assessee
Nil
100%
11
Insurance agent to insurance companies
Insurance business
Nil
100%

RECOMMENDED READ  Clarification Regarding Availment of CENVAT Credit of Tax Dues Paid Under VCES, 2013

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