Service tax payment under reverse charge on rent a cab service

[Asked by Guest]

Dear Sir,

AS PER NOTIFICATION 10/2014 DATED 11.07.2014 IS SERVICE RECEIVER W.E.F 01.10.2014 WILL BE LIABLE TO PAY SERVICE TAX UNDER REVERSE CHARGE BASIS ON RENT A CAB SERVICE ON 50% OF THE BILL AMT EVEN IF SERVICE PROVIDER IS CHARGING ON 60 % OR NOT CHARGING SERVICE TAX AT ALL.PLEASE EXPLAIN , THANKS and REGARDS.

As per above query please clarify the given notification because in the notification it is clearly mention 50 and 50 % each so please clarify for the same, Please mention on what percent service tax payment will be applicable for Service receiver.Thanks and Regards.

[PAWAN KUMAR]

Dear Sir,

As per my view, the notification No.30/2012-ST dated 20.06.2012 has been amended by this Notification No.10/2014-ST dated 11.07.2014.

S.No.7(a) of notification No.30/2012-ST provides that If service provider is raising the bill after claiming the abatement of 60%, then service receiver is liablle for 100% service tax under reverse charge mechanism.

S.No.7(b) of notification No.30/2012-ST as amended by Notification No.10/2014-ST provides that if service provider is raising the bill on full value without claiming abatement, then service receiver is liable for 50% service tax under reverse charge mechanism. Remaining 50% service tax is to be paid by service provider.

Can service receiver Take Credit of Service Tax paid to Rent A Cab Scheme Operator ?

[DR.MARIAPPAN GOVINDARAJAN]

If the vehicle is owned by the service provider and it is his capital goods then the service receiver, in my opinion, is entitled to take credit.

[Ganeshan Kalyani]

If the service provider has taken abatement then he will not charge service tax on invoice and at the same he will forgo the input credit. In such cases the receiver liability is 100% (40% of liability as 60% is abatement). If he has not taken abatement then service tax will be equally paid by both service provider and the service receiver. Service tax credit is certainly not eligible on rent a car service.

[Aditya Kandoi]

If service provider is availing abatement then as per amendment in finance act 2014 100% service tax payable by service receiver on abated value.If service provider is not availing abatement then both service receiver and service provider is liable for 50 % of service tax on full value of service

[Ganeshan Kalyani]

W.e.f. 01.10.2014 the ratio of paying service tax by provider of service and recipient of service is 50:50 and prior to 01.10.2014 the ratio was 60:40.

AI Summary

Reverse charge on rent-a-cab service: recipient bears full liability if provider claims abatement; otherwise liability is shared.
Reverse charge liability for rent-a-cab services depends on whether the provider claims abatement. If the provider bills after claiming the 60% abatement, the service recipient is solely liable to pay service tax under the reverse charge mechanism on the taxable portion. If the provider bills on full value without claiming abatement, liability is split: the recipient pays half of the service tax and the provider pays the remaining half. Notification No.10/2014-ST amended Notification No.30/2012-ST to effect this allocation. Input tax credit eligibility is contested: some contend credit is available if the vehicle is capital goods of the provider; others maintain credit is not available on rent-a-cab services.