Hiring of vechile

[Guest]

We are availing the services of taxis from different operators on tariff basis for regular purposes also some times for specific purposes. However there is no specific contract is being awarded to any taxi operator. Taxi Operators issues bill without charging service tax (Many of them have not taken the registaration being a SSI). My query is does such of service under Fixed Tariff fallsunder the category of Rent a cab. How the company will know whether the taxi operator is availing CENVAT or not. Some times he gives the service tax with full rate.

Thanks

[Mahir S]

Sir,

Any person providing service of ‘renting’ of motor vehicle designed to carry ‘passengers’, which is not covered under the negative list u/s 66D and also not exempted vide Notification No.25/2012-Service Tax, dated the 20th June, 2012 is covered in the description of rent-a-cab service. Hence, any motor vehicle (and not just a cab/taxi) is included. It means it includes renting of motor cars, motor cabs, maxi cabs, mini buses, buses and all other motor vehicles which are designed to carry passengers, irrespective of its passenger carrying capacity. The more meaningful description of this service could be ‘Rent-A-Passenger Vehicle Service’ which is not provided in the listed services. Also note that the vehicles like truck, trailer, dumper, etc designed to carry goods are not covered by this description.

The service of transportation of passengers with or without accompanied belongings by a stage carriage; and metered cabs, radio taxis or auto rickshaws are covered in the negative list, hence not taxable.

As per Sr. No. 9 of Notification No. 26/2012-ST dated 20-06-2012, abatement of 60% is available on Rent-A-Cab Service i.e. service of renting of any motor vehicle designed to carry passengers. It means service tax is payable on only 40% of the value of Rent-A-Cab service. The abatement is subject to the condition that the Cenvat Credit of inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of Cenvat Credit Rules, 2004. If the service provider avail cenvat credit on any input, capital good or input service, used for providing rent a cab service, then abatement is not available.

W.e.f. 01-04-2011, the Central Government has amended the definition of ‘input service’ under Rule 2(l) of Cenvat Credit Rules, 2004 vide Notification No. 3/2011 - CE(NT) dated 01-03-2011 and again vide Notification No. 18/2012 - CE(NT) dated 17-03-2012 (w.e.f. 01-04-2012). The effect of the amendment is that rent-a-cab service has been specifically excluded from the definition of ‘input service’ and hence cenvat credit is generally not available. Cenvat Credit is available only when rent a cab service could be related to a motor vehicle which is capital good for them. In other words, when a motor vehicle designed to carry passengers including their chassis, registered in the name of provider of service, when used for provided output service of- (i) transportation of passengers; or (ii) renting of such motor vehicle; or (iii) imparting motor driving skills, then cenvat credit can be availed.

AI Summary

Rent-a-cab service: abatement limits taxation to a portion of value and cenvat credit restricted unless vehicle constitutes a capital good. Any motor vehicle designed to carry passengers constitutes rent-a-cab service and is taxable unless in the negative list. A statutory abatement reduces the taxable value of rent-a-cab service, but that abatement is forfeited if the provider avails Cenvat credit on inputs, capital goods or input services. Rent-a-cab was excluded from the definition of input service, generally barring Cenvat credit, except where the vehicle is a capital good registered in the provider's name and used for specified output services.