The Indian economy is all set to welcome the new indirect tax law, the Goods and Services Tax (GST) from July 1, 2017.
The GST Council, the highest body, last week, has paved way to the rollout of GST with the approval of rate of taxes for goods and services. In case of services, the council has introduced a new four slab tax structure substituting the current uniform 15% of service tax.
Under the proposed indirect tax regime, certain services under the Goods and Services Tax are taxable under the Reverse Charge Mechanism (RCM), as per which, the service tax on specified services can be collected directly from the service recipient instead of collecting it from the service provider.
Under the GST regime, 18 items are taxable by applying RCM. Some of the important items are the following;
The 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 other than non-assessee online recipient are assessable to GST under RCM. In case of such services, such recipient, i.e, a business recipient is liable to pay 100% service tax on receipt of such service.
In case of services provided by Goods Transport agencies with respect to transfer of goods by road, any factory, society, assesses under the CGST, SGST and IGST, a co-operative society, Companies, Firms and other Casual Taxable persons are liable to pay tax.
Any service provided directly or indirectly by the lawyers or Law Firms to any business entity having turnover of above 20 lakhs are taxable according to the RCM. In the absence of any specific inclusion of Senior Advocates, it seems that RCM will not be applicable to them and consequently, they are liable to pay service tax directly to the Government.
RCM is applicable to services provided by Arbitral Tribunals to business entities also.
Currently, RCM is applicable to all the above services.
In case of such services, any person, specifically, a body corporate or a partnership Firm is liable to pay 100% service tax on availing service.
Services provided by the above authorities to any business entity are taxable as per the RCM. However, the service, in this context, excludes renting of immovable property and such other specific services.
A Company or a body corporate is responsible to pay tax under the GST regime for availing the services of its Director.
With respect to the services provided by an Insurance Agent or Recovery agent, the recipients, ie, such Insurance Company and the Banking/non-Banking Company or Financial institution is liable to pay tax.
In case of such services, the recipient, who is an Importer as defined under clause (26) of section 2 of the Customs Act, 1962 is assessable to tax.
Services such a transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works, are taxable in the hands of the Publisher, Music Company or the producer under the new indirect tax regime.
In case of services provided by Radio taxi or Passenger Transport Services provided through electronic commerce operator, the tax is payable in the hands of any person availing such service.
