Taxing the service industry will service no purpose unless one makes it sure, who is to pay the tax. Identifying the person responsible to pay tax is of utmost importance. This is exactly what has happened when reverse charge or partial reverse charge mechanism is applied in certain cases. The common sense behind any indirect taxation levy is that there should be an identifiable person who shall charge the tax and shift the burden on someone else. While defining the ‘Person’ CBEC has expanded the scope of term to fullest extent possible. ‘Person’ has been defined Section 65 B of the Act. Accordingly following Ten categories are considered as persons for the purposes of the Act an individual, a Hindu undivided family, a company, a society, a limited liability partnership, a firm, an association or body of individuals (whether incorporated or not), Government, a local authority, or every artificial juridical person, not falling within any of the preceding sub-clauses. However while identifying the responsibilities for various other provisions of Service Tax the above separate identities are loosely merged into a group without being consistent.

A novel concept of Partial reverse charge mechanism was introduced last year. Unlike reverse charge mechanism, here the burden of tax liability is shared between both the service provider as well as receiver. As regards Notification No. 30/2012-ST dated 20.06.2012 the services of renting of a motor vehicle, supply of manpower, security service or service portion in works contract provided by any individual, Hindu Undivided Family or partnership firm (whether registered or not), including association of persons, to a business entity registered as body corporate, located in the taxable territory shall be subject to partial reverse charge mechanism. There are two concerns here. Firstly, What is the status of LLP? Whether it is Body corporate or partnership? According to Service Tax Rules, 1994 the “partnership firm” includes a limited liability partnership LLP. But such definition is to be restrictively applied only in case of Service Tax Rules 1994 and not to all the aspects of Service Tax. Here, department can take a stand that partial reverse charge is applicable if services are provided by LLP (as it is partnership) and consequently force the service receiver to pay Service Tax vice-a-versa it may compel the LLP (by treating it as body corporate) that if it receives services from individual etc., the Service Tax should be paid by the LLP. Hence this budget should clarify such anomalies where the exercise is revenue neutral but the department may pressurize the LLP. Another area of concern is that According to Section 65B (17) "business entity" means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession. Thus if services are provided to Section 25 Companies (non profit companies) of the Companies Act, 1956 whether the 100% tax should be paid by the service provider. As though Section 25 companies are body corporate but they cannot be considered as business entities.

An analysis of the provisions of Service Tax Rules 1994, the Rule 6(1) states that the service tax shall be paid, (i) by the 6th day of the next month, if the tax is deposited electronically through internet banking; or (ii) by the 5th day of the month, in case of manual payment. In First proviso it has been provided that where the assessee is an individual or proprietary firm or partnership firm, instead of month the service tax shall be paid in the immediately following quarter. Second proviso states that in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is less than or equal to Rs.50 Lakhs in the previous financial year, the service provider shall have the option to pay tax based on receipt of payment. Here the anomaly is that HUFs are treated as proprietary concerns hence, they may get the benefit First proviso of quarterly payment, but the limit of Rs.50 lakhs (option to make payment of Service tax based on receipts) is available only to individual and partnership firm and not to proprietary concerns. Hence, if letters of law are harshly interpreted by the Revenue then HUF assessee are required to follow Point of Taxation Rules 2011 and they have to make payment of Service Tax irrespective of the actual receipts. It is perceived that CBEC will increase the reach of Reverse Charge Mechanism in the coming budget 2013. Therefore it becomes even more important that anomalies should be removed and person responsible to follow the procedures should be clearly identified. The nation expects at every budget with eager eyes that this time the changes would be in direction of hassle free tax administration, let us see whether the Budget 2013 would be bring smile or shock on the face of the service industry.