10 August 2013
I have to say Reverse charge applicable with below supporting..
1)Notifications 45/2012-ST has added the security services and services provided by directors to the list of reverse charge mechanism.
2)In this context, the Service Tax Rules, 1994 have also been amended vide notification no. 46/2012-ST dated 7.8.2012 for adding the definition of security services.
3)This notification has inserted a new clause (fa) in the rule 2(1) of the Service Tax Rules, 1994 which defines the term “security services”.
10 August 2013
1)“(fa) “security services” means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity” The above definition is very wide and it covers:- (a)The services related to security of any property;
(b)The property may be movable or immovable;
(c)The security services may be provided in any manner;
(d)It will include the services of INVESTIGATION, DETECTION or VERIFICATION of any FACT or ACTIVITY.
If any service satisfies the above referred criteria, it will fall under the definition of “security services” and reverse charge mechanism will be applicable if these services are provided by an individual, HUF, partnership firm or AOP to any business entity registered as body corporate.
Please note the inclusion (d)...which will create some doubt on applicability of Reverse charge on chartered accountant services also.
10 August 2013
New definition v/s Services provided by Chartered Accountants:-
1)Amongst a variety of services as provided by the Practicing Chartered Accountants, the following services are very commonly carried out:-
(a)Investigation Services:-
Chartered Accountants are often called upon to carry out investigation to ascertain the financial position of business in connection with matters such as a new issue of share capital, the purchase or sale or financing of a business, reconstruction and amalgamations. These services are coverable under the definition of ‘Security Service’ as Chartered Accountant provides service of “investigating the facts of financial position or investigating the activity of operating performance”.
(b)Stock Audit and Assets Verification:-
Practicing Chartered Accountants also conduct verification of asset and stock audit of borrower firm for banks or loan lender. This activity involved verification of asset or stock either physically or otherwise and also involved inspection work. Therefore it is covered under above discussed definition of security service.
Statutory Audits and Other Internal Audits:-
The statutory audit carried out by the auditors also involves the verification, inspection and detection of fact represented by financial statements. Further the object of audit is also to secure the interest of stakeholders. Thus, these services will also be covered under the definition of the security services.
The above referred are few very common services out of a range of services provided by the professional Chartered Accountants. In fact a no. of other services are provided in sequence for carrying out their statutory duties.
Yes the term security services are also covered under reverse charge mechanism and the definition of security services are as follows
security services” means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and
includes the services of investigation, detection or verification, of any fact or activity”
The first part of the definition is exhaustive , However the second part is inclusive definition
Normally security agency provides the services mentioned in first part,
By making it inclusive, the law maker may intend to bring the services provided by the security agency of investigation to also bring within its scope
If the intention of the law maker to cover service provided by chartered accountant, then the same would have been spelt out clearly
However the department has not come out with any circular to clarify on the same nor there is any case law to support the same.
Hence subject to litigation,
Hence we will not able to categorically come to a conclusion that above services provided by chartered accountant would fall within reverse charge mechanism
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