Service ta Liability on hiring mtor(Non AC) Vehicle

[Srivatsan Krishnamachari]

Dear Learned Friends,

A Body Corporate hires the service of a transport Operator(Individual) who has license to run his vehicle from RTA as a contract carriage, for transporting the employees of the said Body Corporate from a particular point to its place of work(factory) where no public transport facility is available. Should the Body Corporate pay service tax under reverse charge mechanism on 40% value of the Bill raised by the Individual Transporter who runs the contract carriage service.Are not Contract Carriers exempted from the definition of "Rent a Cab or Motor vehicle.

Kindly clarify.

Thanks and With Regards,

K.Srivatsan

[Radha Arun]

Non-AC contract carriages are exempted under entry 23(b) of notification 25/2012-ST; however the exemption specifically excludes "charter or hire". Therefore the terms of the contract with the transport operator are vital to the issue.

AI Summary

Contract carriage exemption may not cover charter or hire, affecting reverse-charge liability on transport services.
Whether a body corporate hiring a non AC motor vehicle for employee transport is liable under the reverse charge mechanism depends on whether the service is a contract carriage exempt from tax or is excluded as a charter or hire. The exemption for non AC contract carriages excludes services described as charter or hire; therefore the contractual terms and factual characterisation of the engagement determine whether the exemption applies or reverse charge liability arises.