Clarification regarding leviability of Service tax in respect of services provided by arbitral tribunal and members of such tribunal
In accordance with Notification No. 30/2012-ST dated June 20, 2012, 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.
Further, In the Budget 2016-17, the Entry No. 6(c) of the Notification No. 25/2012-ST dated June 20, 2012 has been omitted with effect from April 1, 2016, which read as: "Services provided by a person represented on an arbitral tribunal to an arbitral tribunal."
Now, 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 on the arbitral tribunal, with effect from April 1, 2016
Therefore the Board explains that-
· 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 and
· Services are provided or agreed to be provided by the panel of arbitrators, as comprising of 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
· Thus, 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.
Further, The Central Board of Excise and Customs vide Circular No. 193/03/2016-Service Tax dated May 18, 2016 has issued clarification that Service tax liability for services provided by an arbitral tribunal (including the individual arbitrators of the tribunal) shall be on the service recipient under reverse charge mechanism if it is a business entity located in the taxable territory with a turnover exceeding rupees ten lakh in the preceding financial year.