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Every person providing a taxable service is required to pay service tax at the prescribed rate. However in certain cases the service recipient is made liable to pay service tax on the services received. Since the person receiving services is made liable to pay service tax, the mechanism of collection of such tax is called as reverse charge (RCM).
The purpose of determining the service tax payable by recipient of service and in some specific cases by both the provider and recipient of the service. In the case of the following services notified as specified services, the service recipient becomes the person liable to pay service tax to the Government
o Insurance Agent's services
o Goods Transport Agency (Transportation by Road)
o Sponsorship Service
o Services by Arbitral Tribunal to Business Entity
o Legal services by Individual Advocate or firm of Advocates to Business Entity
o Support Services
o Service received by person located in taxable territory from person located in a non-taxable territory
The following services when provided by individual or firm or partnership or Hindu Undivided Family (HUF) or proprietary or partnership firm including (Association of Persons) AOP, both service provider and service recipient are made liable to pay service tax to the extent specified:
o Hiring or renting of motor vehicle designed to carry passengers
o Manpower supply
o Works contract
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