Service Tax in respect of services provided by arbitral tribunal and members of such tribunal - CBEC Clarifies
SERVICES provided by an arbitral tribunal to
(i) any person other than a business entity; or
(ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year,
are exempt from services tax [Entry 6(a) of Notification No. 25/2012 - ST].
"arbitral tribunal means a sole arbitrator or a panel of arbitrators"
Services provided or agreed to be provided by an arbitral tribunal to a business entity (turnover exceeding Rs 10 lakh) located in the taxable territory, is taxable under reverse charge mechanism and recipient of service is liable to discharge service tax liability [Notification No. 30/3012 - ST (Sl. No. 4)].
It has come to the notice of the Board that there is some confusion regarding the legal position with respect to continuance of reverse charge mechanism for services provided by arbitral tribunals and individual arbitrators of the arbitral tribunal, with effect from 1.4.2016.
Board explains:
It could be argued that service provided by an arbitrator on the panel of arbitrators, to the arbitral tribunal is taxable under forward charge. However, this does not appear to be a correct interpretation of law. Any reference in Service Tax law to an "arbitral tribunal" necessarily includes the natural persons on the arbitral tribunal, by virtue of clause (d) of Section 2 of the Arbitration and Conciliation Act, 1996. Services are provided or agreed to be provided by the panel of arbitrators, as comprising the several natural persons on the said panel, to the business entity or to the arbitration institution approached by the business entity for purposes of arbitration. The liability to discharge service tax is on the service recipient, if it is a business entity located in the taxable territory with a turnover exceeding rupees ten lakh in the preceding financial year.
And clarifies:
Service Tax liability for services provided by an arbitral tribunal (including the individual arbitrators of the tribunal) shall be on the service recipient if it is a business entity located in the taxable territory with a turnover exceeding rupees ten lakh in the preceding financial year .
Circular No. , Dated: May 18, 2016