Subsequent to the introduction of sub-section (2) of section 68 under the Finance Act, 1994 (the Act), the central government has specified certain taxable services in respect of which a service recipient is required to pay service tax at the rate specified in section 66 of the Act. The concept of collection of service tax from the service recipients is generally called as Reverse Charge. Such a concept was in place even before the introduction of the negative list based taxation of services. However, in addition to concept of reverse charge, a new concept of Joint Charge has also been introduced w.e.f. July 1, 2012.
According to section 69 of the Act, the person who is liable to pay the service tax under reverse charge mechanism, will make an application for registration to the Superintendent. This post has shed light on some pertinent issues regarding registration and payment under reverse charge mechanism.
Whether the Service Receiver is required to provide description of services received under the head ‘description of services provided or to be provided by the applicant’ in Form ST-1?
According to section 69 of the Act, the person liable to pay service tax under reverse charge will file an application for registration in Form ST-1. As per Rule 4 (5A) of the Service Tax Rules, 1994, where the person registered as a service provider starts paying service tax under reverse charge, he will amend his registration certificate (Form ST-2) by making amendment in Form ST-1 online through aces website within a period of 30 days of such change.
In my opinion, the service receiver should mention the description of services received, under Reverse Charge in Form ST-1 mainly because of the following reasons:
1. As per Section 68(2) of the Act, in case the service receiver is liable to pay service tax under reverse charge, all provisions of Chapter V will be applicable to such person as if he is the person liable for paying the service tax in relation to such service.
In accordance with the clarification given in Circular No. 72/2/2004-ST, the service provider should indicate all the taxable services being provided by him while making an application for registration under service tax and Certificate of Registration (Form ST-2) should also indicate the details of all the taxable services provided by the service provider.
2. Notification No. 01/2013-ST, dated 22-02-2013 has introduced the new Form ST-3 format for filing return for the period July 1 to Sept 30, 2012. As per the general instructions given for filling the Form ST-3,
“If there is a change in the address or any other information as provided by the assessee in Form ST-1 or as contained in Form ST-2, the assessee should file amendment application online in ACES for getting the amended ST-2. If the assessee has provided / received any additional service for which he is not registered, he has to first file the amendment application through Form ST-1 and after the approval of the same by the departmental officer, he should file the return”.
Earlier, the above highlighted text was not included in the general instructions for filling the Form ST-3.
3. Suppose, the assessee is paying service tax under reverse charge and is therefore required to get registered under section 69 of the Act. While making an online application for registration in Form ST-1, past selecting ‘the service recipient option’ under Category of Registrant head and filling the other mandatory fields, in case he doesn’t select the description of taxable services received and tries to move to the next page, he will get an error message “Please search and select at least one taxable service offered” and thus will not be able to complete the registration process.
However it’s not feasible to make distinction between the services received and provided by the assessee, given the existing format of Form ST-1. The service receiver should select the description of services he is receiving or expected to receive in near future while applying for registration/amendment in Form ST-1. The description of services eventually becomes apparent to the department on filing the return by the assessee.
Under which accounting code, the service tax will be deposited in reverse charge? Will it be deposited in the code under which the assesse is registered as a service provider or code of the services received?
The assessee cannot pay reverse charge under the accounting code in which he is registered as a service provider. The service tax is always paid under the accounting code of the service under which description of received/provided service falls.