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Reverse Charges in Service Tax

Under the Reverse Charges Mechanism, the service receiver is liable to pay service tax directly to the government instead of the service provider on certain notified services.

With effect from 1 July, 2012, there are certain services on which 100% service tax needs to be paid by Service Recipient and there is partial reverse charge wherein both service provider and service recipient need to pay service tax as per certain prescribed percentages.

Hence the service receivers will now have to register themselves with the respective tax authorities and will have to file the required returns.

Further, the service receiver cannot claim the general exemption of rupees 10 lakhs.

More details and list of services can be found under Notification No. 30/2012- ST dated 20-06-2012 and as amended by Notification No. 45/2012- ST dated 07-08-2012.


History of Taxation

The origin of the word "Tax" is from "Taxation" which means an estimate. The levying of taxes dates back to 2000 years across many empires – Greece, German and Roman empires. For many centuries, revenue from taxes went to the Monarch.

As with most problems, taxation problems date back to earliest recorded history.

In India, the system of direct taxation has been in force in one form or another even from ancient times. There are references both in Manu Smriti and Arthashastra to a variety of tax measures. Manu, the ancient sage and law-giver stated that the king could levy taxes, according to Shastras. He advised that taxes should be related to the income and expenditure of the subject. The detailed analysis given by Manu on the subject clearly shows the existence of a well-planned taxation system, even in ancient times. Not only this, taxes were also levied on various classes of people like actors, dancers, singers and even dancing girls. Taxes were paid in the shape of gold-coins, cattle, grains, raw-materials and also by rendering personal service.

Kautilya’s Arthasastra, deals with the system of taxation in an elaborate and planned manner, written sometime in 300 B.C. A major portion of Arthasastra is devoted by Kautilya to financial matters including financial administration. According to famous statesman, the State not only collected a part of the agricultural produce which was normally one sixth but also levied water rates, octroi duties, tolls and customs duties. Taxes were also collected on forest produce as well as from mining of metals etc. Salt tax was an important source of revenue and it was collected at the place of its extraction. Kautilya described in detail, the trade and commerce carried on with foreign countries and the active interest of the Mauryan Empire to promote such trade.