Service Tax Liability of Any Person Other Than Service Provider

Section 68 (1) of the Finance
Act, 1994 (‘Act’ for short) provides for the liability of paying service
tax by the service provider.  Section 68 (2) of the Act provides
that, other than service provider, in respect of such taxable services as
may be notified by the Central Government in the Official Gazette, the service
tax thereon shall be paid by such person and in such manner as may be
prescribed at the rate specified in section 66B and all the
provisions of this Chapter shall apply to such person as if he is the person
liable for paying the service tax in relation to such service.  The
proviso to Section 68 (2) provides that the Central Government may
notify the service and the extent of service tax which shall be payable by such
person and the provisions of this Chapter shall apply to such person to the
extent so specified and the remaining part of the service tax shall be paid by
the service provider.

Section 65B (37) defines the term
‘person’.  According to this section the term ‘person’ includes the
following:
*      
an individual;
*      
a Hindu Undivided Family;
*      
a company;
*      
a society;
*      
a limited liability partnership;
*      
a firm;
*      
an association of persons or body of individuals,
whether incorporated or not;
*      
Government;
*      
a local authority; or
*      
every artificial person, not falling within the above.
Vide Notification No. 30/2012-ST,
dated 20.06.2012 the Government introduced the Reverse Charge Mechanism
i.e., the service tax is made liable to be paid by the service receiver. 
The Central Government hereby notifies the following taxable services and the
extent of service tax payable thereon by the person liable to pay service tax
for the purposes of the said sub-section, namely:-
Taxable services
The following are the taxable services for
this purpose (as amended up to 11.07.2014):
*   provided or agreed to be provided  by an
insurance agent to any person carrying on the insurance business;
*  provided or agreed to be provided by a recovery agent
to a banking company or a financial institution or a non-banking financial
company;
* provided or agreed to be provided  by a
goods transport agency in respect of  transportation  of
goods by road, where the  person liable to pay freight 
  is,-
*   any factory registered under or governed by the
Factories Act, 1948
*   any society registered under the Societies
Registration Act, 1860 or under any other law for the time being in force in
any part of India;
*   any co-operative society established by or under
any law;
*  any dealer of excisable goods, who is registered
under the Central Excise Act, 1944  or the rules made there
under;
*  any body corporate established, by or under
any law; or
*  any partnership firm whether registered or not
under any law including association of persons;
*  provided or agreed to be provided by way of
sponsorship  to anybody corporate or partnership firm located in the
taxable territory;
*   provided or agreed to be provided by,-
*   an arbitral tribunal, or
*   an individual advocate or a firm of advocates by
way of legal services, or
*   Government or local authority by way of support
service excluding,-
*   Renting of  immovable property, and
*  Services specified in sub-clauses (i), (ii) and
(iii) of clause (a) of section 66D of theFinance Act,1994, to any business entity located in the
taxable territory;
*   provided or agreed to be provided by a director of a
company or a body corporate to the said company or the body corporate;
*   provided or agreed to be provided by way of renting of
a motor vehicle designed to carry passengers to any person who is not in the
similar line of business or supply of manpower for any purpose or security
services or service portion in execution of works contract by any
individual, Hindu Undivided Family or partnership firm, whether registered
or not, including association of persons, located in the taxable territory
to a business entity registered as body corporate, located in the taxable
territory;
The taxable services provided or agreed to
be provided by any person which  is located in a non-taxable territory and
received by any person located in the taxable territory.
Extent of service tax payable
The extent of service tax payable thereon
by the person who  provides the service and the person who receives the
service for the taxable services specified in (I) shall be as specified in the
following Table, namely:-”
Table
Sl.
No.
Description
of service
%age
of tax payable by the person providing service
Percentage
of service tax payable by the person receiving the service
(1)
(2)
(3)
(4)
1
In respect
of  services  provided or agreed to be
provided  by an insurance agent to any person carrying on insurance
business
Nil
100%
2
In respect of services provided or agreed to be
provided by a recovery agent to a banking company or a financial institution
or a non-banking financial company
Nil
100%
3
In
respect of  services  provided or agreed to be
provided  by a goods transport agency in respect
of transportation  of goods by road
Nil
100%
4
In
respect of  services  provided or agreed to be
provided  by way of sponsorship
Nil
100%
5
in
respect of  services  provided or agreed to be
provided  by an arbitral tribunal
Nil
100%
6
in
respect of  services  provided or agreed to be
provided  by individual advocate or a firm of advocates by way of
legal services
Nil
100%
7
in respect of services provided or agreed to be
provided by a director of a company or a body corporate to the said company
or the body corporate
Nil
100%
8
in
respect of  services  provided or agreed to be provided  by
Government or local authority by way of support services excluding,- 
(1) renting of immovable property, and (2) services specified
in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of
the Finance Act,1994
Nil
100%
9
(a)   in respect of  services  provided
or agreed to be provided  by way of renting of a  motor
vehicle designed to carry passengers on abated value to any person who is not
engaged in the similar line of business
(b)   in respect of  services  provided
or agreed to be provided  by way of renting of a  motor
vehicle designed to carry passengers on non abated value to any person who is
not engaged in the similar line of business
Nil
50%
100%
50%
10
in
respect of  services  provided or agreed to be
provided  by way of supply of manpower for any purpose 4[or
security services]
25%
75%
11
in
respect of  services  provided or agreed to be
provided  in service portion in execution  of works contract
50%
50%
12
in respect of  any taxable services  provided
or agreed to be provided  by any person who is located in a
non-taxable territory and received by any person located in the taxable
territory
Nil
100%
Threshold exemption of ₹ 10
lakhs is not available to the service
recipients. Vide Notification No. 07/2015-Service
tax, dated 01.03.2015 amendments have been brought by the Government for
the Notification No. 30/2012-ST, dated 20.06.2012.   The
following taxable services are inserted:
* taxable services provided or agreed to be provided by
a mutual fund agent or distributor to a mutual fund or asset management
company;
*  taxable services provided or agreed to be provided by
a selling or marketing agent of lottery tickets to a lottery distributor or
selling agent;
* taxable services provided or agreed to be provided by
a person involving an aggregator in any manner.
The column No.4 in the above table has
been substituted as Percentage of service tax payable by any person
liable for paying service tax other than the service provider.

This change has been considered as a
serious change in the service tax liability on account of reverse charge
mechanism.  By this substitution any person, coming under the definition
of person may be attached with the liability of service tax.   He may
not be a service provider or service recipient.   However he can be
made liable.   The term ‘any person liable for paying service tax
other than the service provider’ has not been defined or explained in the said
Notification.  Even no clarification has been issued by the Department in
this regard to who may be covered under this category.
This change seems to be akin to the Section
87 which deals with the recovery of any amount due to Government. 
The provisions of Section 87 read as follows:
87. Where any amount payable by a
person to the credit of the Central Government under any of the provisions of
this Chapter or of the rules made there under is not paid, the Central Excise
Officer shall proceed to recover the amount by one or more of the modes
mentioned below:-
 (a)  the Central Excise Officer may deduct or may
require any other Central Excise Officer or any officer of customs to deduct
the amount so payable from any money owing to such person which may be under
the control of the said Central Excise Officer or any officer of customs;
 (b)  (i)  the Central Excise Officer may, by
notice in writing, require any other person from whom money is due or may
become due to such person, or who holds or may subsequently hold money for or
on account of such person, to pay to the credit of the Central Government
either forthwith upon the money becoming due or being held or at or within the
time specified in the notice, not being before the money becomes due or is
held, so much of the money as is sufficient to pay the amount due from such
person or the whole of the money when it is equal to or less than that amount;
 (ii)  every person to whom a notice is issued
under this section shall be bound to comply with such notice, and in
particular, where any such notice is issued to a post office, banking company
or an insurer, it shall not be necessary to produce any pass book, deposit
receipt, policy or any other document for the purpose of any entry, endorsement
or the like being made before payment is made, notwithstanding any rule,
practice or requirement to the contrary;
 (iii)  in a case where the person to whom a
notice under this section is sent, fails to make the payment in pursuance
thereof to the Central Government, he shall be deemed to be an assessee in
default in respect of the amount specified in the notice and all the
consequences of this Chapter shall follow;
(c)  the Central Excise Officer may, on an
authorization by the Commissioner of Central Excise, in accordance with the
rules made in this behalf, distrain any movable or immovable property belonging
to or under the control of such person, and detain the same until the amount
payable is paid; and in case, any part of the said amount payable or of the cost
of the distress or keeping of the property, remains unpaid for a period of
thirty days next after any such distress, may cause the said property to be
sold and with the proceeds of such sale, may satisfy the amount payable and the
costs including cost of sale remaining unpaid and shall render the surplus
amount, if any, to such person;
[Provided that where the person
(hereinafter referred to as predecessor) from whom the service tax or any other
sums of any kind, as specified in this section, is recoverable or due,
transfers or otherwise disposes of his business or trade in whole or in part,
or effects any change in the ownership thereof, in consequence of which he is
succeeded in such business or trade by any other person, all goods, in the custody
or possession of the person so succeeding may also be attached and sold by such
officer empowered by the Central Board of Excise and Customs, after obtaining
the written approval of the Commissioner of Central Excise, for the purposes of
recovering such service tax or other sums recoverable or due from such
predecessor at the time of such transfer or otherwise disposal or change.
(d)  the Central Excise Officer may prepare a
certificate signed by him specifying the amount due from such person and send it
to the Collector of the district in which such person owns any property or
resides or carries on his business and the said Collector, on receipt of such
certificate, shall proceed to recover from such person the amount specified
there under as if it were an arrear of land revenue.
Section 87 itself is considered as stringent
provisions.  The High Courts stayed actions taken by the Department under
this Section. The above said amendment brings another stringent provision
making liable any person for the payment of service tax other than the service
provider.  This also will bring into many a litigation. The
GST is going to be introduced in the next year i.e., from 01.04.2016 as
declared by the Hon’ble Finance Minister.   Constitution amendment
bill for this purpose has been introduced in the Lok Sabha.   In such
circumstances it is felt such change of law is not required and the Ministry is
to reconsider the same.
RECOMMENDED READ  SERVICE TAX - (Notification No. 51/2016-Service Tax) SEEKS TO AMEND PLACE OF PROVISION OF SERVICES RULES, 2012 SO AS TO EXCLUDE ONLINE INFORMATION AND DATABASE ACCESS OR RETRIEVAL SERVICES

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  • Anonymous

    reverse charge table is not up to date
    manpower and security services are no longer under partial reverse charge but under full reverse charge