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Normally it is imposed on service provider, however sometimes, it is imposed on service receiver also.
Types of Service Tax
Service tax is of 3 types
1. Normal Charge
2. Reverse charge
3.Partial Reverse charge
Difference
| Normal Charge | Reverse Charge | Partial Reverse Charge |
| Service tax is paid by service provider | Service tax is paid by service receiver | Service tax is paid by service provider and some by service receiver |
| Service Provider charges service tax from service reciever, and collects and deposits to government | Service receiver deposits service tax directly to government | Some portion of service tax is paid by Service provider to government and some directly by service receiver |
| It is most normal case | It is a rare case | It is a very rare case |
Exam Questions
Question 4
Mr. A sponsored a dance competition organized by ‘Taal Academy’, a dance school run by an
individual. The dance competition was named as ‘Mr. A’s Dance Show’ by ‘Taal Academy’.
Who is liable to pay service tax in this case? Will your answer be different if ‘Taal Academy’ is
run by a partnership firm?
In case of taxable service provided or agreed to be provided by way of sponsorship to any
body corporate or partnership firm located in the taxable territory, person liable to pay service
tax is the person receiving such service.
However, since in the given case sponsorship service is provided to an individual (Mr. A), the
person liable to pay service tax will be service provider i.e., ‘Taal Academy’. Further , since
the status of service receiver is relevant for determining as to who would pay service tax,
status of service provider is immaterial. Therefore, as long as sponsorship service is rendered
to an individual, service tax will be payable by service provider i.e., ‘Taal Academy’
irrespective of whether the same is run by an individual or a partnership firm.
Question 28
Ashok, a taxable service provider, outsourced a part of work by engaging Suresh, a
subcontractor. Service tax is charged and paid by Ashok for the total work. Whether Suresh,
the sub contractor, is liable to charge and pay any service tax?
Yes, Suresh, the sub-contractor is liable to charge and pay service tax.
The fact that services provided by such sub-contractors are used by the main service provider
for completion of his work does not in any way alter the fact of provision of taxable service by
the sub-contractor.
In essence, Suresh, the sub-contractor has to be treated like any other service provider and
service tax liability has to be determined accordingly.
The fact that Ashok, the main contractor has paid the service tax on the total work, will not
absolve Suresh from his exigibility or liability to pay service tax. Suresh has to charge and pay
service tax in respect of the taxable services rendered by him to Ashok.
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