Under reverse charge mechanism in India, the recipient of certain services is liable to pay service tax instead of the service provider. This includes manpower recruitment and security services provided by individuals, partnerships, or HUFs. For example, if a company hires 30 workers through an agency that is a partnership, the company must pay service tax of Rs. 37,080 on the labor charges of Rs. 300,000. There are due dates for payment and filing returns that vary based on the type of business. The key points are that liability cannot be shifted between parties, exemption thresholds do not apply to the recipient, and payment must be made in cash without using Cenvat credit.

1. SERVICE TAX UNDER REVERSE CHARGE ON MANPOWER
RECRUITMENT SERVICE AND SECURITY SERVICE
Normally, service tax is payable by person who provides the service but Section 68(2) of the Finance Act,1994
makes provision for reverse charge i.e service receiver is liable to pay service tax.The concept of reverse
charge plays an important role in payment of service tax to the Government.
There are some common facilities taken by almost all the entities and following is an example of it and the
implication of reverse charge mechanism on payments made for them:-
Services provided or agreed to be provided by way of supply of manpower or Security services
“Manpower Recruitment or Supply Agency” means any person engaged in providing any service,
directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise
What if a company is recruiting manpower from outside agencies like security guards, workers and
employees ?
Q 1: Is there any liability on the part of company to make payment of service tax ?
Yes , company is liable to pay service tax under reverse charge mechanism if the service provider is :-
 Individual
 Partnership firm (registered or unregistered)
 HUF

2. Q 2: On what amount company is required to pay service tax ?
A company is required to pay service tax on 100% of labour charges charged by the manpower agency
Example: ABC pvt ltd recruits 30 workers for production department from XYZ manpower services( a
partnership firm) . XYZ charges following amounts against a bill
Labour charges 300000
Total bill amount 300000
Liability on the part of company to make payment of service tax = 300000*100%*12.36% i.e Rs
37080/-
Service tax will be applicable on salary plus PF, ESI, commission of labour contractor
and other charges
Threshold Exemption of Rs 10 lacs available in case of reverse charge ?
There is threshold exemption of Rs. 10 Lacs available under N/No. – 33/2012-ST, but the same is allowed only
to the service provider. The service recipient liable to pay tax under reverse charge mechanism, on services
covered u/s 68(2) has been specifically excluded to avail the threshold exemption.
i.e a company is required to get registered in service tax even if it is not a service provider or services
provided by it have not crossed limit of 10 lakhs.It has to deposit the service tax and file the service
tax returns as per the finance act 1994.
Due date for payment of service tax are as under:
Electronic Payments through Internet :
Category Frequency Due Dates
In case of Individuals, Proprietary
Firms & Partnership Firms
Quarterly as mentioned below -
( i ) For quarter ending 30th
June
( ii ) For quarter ending. 30th
Sept.
( iii ) For quarter ending 31St
Dec.
( iv ) For quarter ending 31st
March
- by 6th July
- by 6th Oct
- by 6th
Jan
- by 31st March.

3. Others (e.g. Companies,
Societies, Trusts etc.) Monthly
By 6th of the month immediately
following the month in which
payments are received towards the
value of taxable services.
However, in case of March, the
payment should be made by 31st
March.
Due date for filing of return of service tax are as under:
For half year To be filled by
1st
april to 30th
September 25th
October
1st
October to 31st
march 25th
april
Important Points in Reverse Charge Mechanism
 Liabilities of both the service provider and service receiver are statutory and independent of each other
 Liability cannot be shifted by mutual agreement
 Reverse charge will not apply where the service receiver is located in non-taxable territory for example Jammu and
kashmir and outside india.
 Service receiver under reverse charge cannot avail exemption of Rs. 10 lakh under Notification No. 33/2012-ST
dated 20.06.2012
 Service Tax under reverse charge has to be paid only by cash vide GAR Challan No. 7 and it cannot be paid by way
of utilization of Cenvat Credit.
 Once paid, Cenvat credit can be taken for paying eligible input service