RENT-A-CAB Service Tax

[Renuka Devi]

For Example, Mr Robert opens M/s Robert Rent a Cab service store to be owned by him individually. He takes the Car/Bolero/Bus/Tata from Mr X,Y,Z,P,Q,R individuals motor owner by giving hiring Fees to each of them on monthly basis. Now, M/s Robert Rent a Cab service store give out those motors for Customer uses as:-

1. One bus is being used by One Govt University College on giving a hire charge to Robert.
2. Likewise, One Tata is being used by One Industrial Firm of Company Ltd.
3. Likewise, One Bolero is used by One family for a month for visiting interesting sites in the State.

From above, please someone clarify –

1. Who should be registered to Service Tax Dept and pay Service Tax (Robert or X,Y,Z,P,Q,R)?
2. Who are the SERVICE PROVIDER and SERVICE RECIPIENT here?
3. What do these means – if abated condition Taxable is 0% for Provider and 100% for Recipient But but…if unabated condition Taxable is 60% for Provider and 40% for Recipient.
4. Please make the billing nature for Service Tax in regards to Sl.No. (1) (2) (3) also.
5. Examine as, Service Tax rate 14% and Mr. Robert gross income has reached 10 Lacs in last financial year. But if, his gross income doesnot reach 10 Lacs yet in any year so far what will be the S.Tax liability for Sl.No. (1) (2) (3) ?

[Arun Kumar Singh]

The service provider (Robert) will registered under service tax. In case of service recipients are business entity registered as a body corporate they are liable to pay service tax under RCM vide notification no. 30/2012-ST. If service provider is under ssi exemption then recipient will pay the service tax on abated value at the rate of 14%.

[Renuka Devi]

Thanks to dear Arun Kr.

Pls Arun Or any Other, try to give more detail answer as to how may doubted questions go (pls review the question).

[Yash Goyal]

Dear Renuka,

Firstly it must be noted that there are two independent transactions in the case discussed. Firstly service is being provided by the individual car owners to M/s Robert.. And secondly service is being provided by M/s Robert to its customers. Accordingly the service tax implications will have to be analysed on both the transactions independently.

In the first case: Hiring of cars by car owners to M/s Robert.

The declared service entry no 6 is relevant which reads as - "Transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods"

The expression "without transfer of right to use such goods" is important. Kindly clarify whether the owners give their vehicles on hire along with driver or they hire out only the vehicles and driver is employed by M/s Robert.

In my view, if the vehicles are given along with drivers, then the control is with the owners and hence right to use the goods is not transferred. Thereby it will be covered under the above declared service and service tax will be leviable on the same. The owners shall be the service providers and they will have to obtain registration and discharge service tax liability. However also note that there is a small service provider exemption with threshold limit of INR 10 Lacs available. Also a threshold limit of INR 9 Lacs is available for obtaining service tax registration. The provisions of reverse charge will not be applicable in this case.

In case only the vehicles are given on hire and drivers are employed by M/s Robert then it can be said that the control over the vehicles has been given. Hence the transaction will not be covered under the definition of service and consequently service tax law will not be applicable. The same is a deemed sale as per the constitution and hence sales tax / VAT will be leviable on the same. The liability of VAT / sales tax is to be decided based on the respective state laws. Threshold exemptions may be available in VAT laws also.

Hope this clarifies the issue with respect to first transaction.

About the transaction of renting of vehicles by M/s Robert, as per my understanding of your case and considering the general industry practise, the transaction will be covered under the rent a cab service. I agree with the view of Mr. Arun Singh and M/s Robert will have to obtain service tax registration. The provisions of reverse charge will be applicable subject to the conditions therein. Also the abatement can be claimed by M/s Robert subject to the condition of non availment of cenvat credit. Kindly refer respective notifications for complete details.

The small service provider exemption is very clear that if in previous year the turnover has crossed INR 10 Lacs then service tax will be leviable from the first rupee of service provided in current year. This exemption can be claimed only if the value of service provided in last year is less than INR 10 Lacs.

Regarding the provisions of reverse charge. If abatement is claimed then service tax is leviable only on 40% / 50% of the service value. The entire service tax chargeable in this case is required to be paid by service recipient, subject to fulfilment of other conditions.

If abatement is not claimed then service tax is leviable on entire service value. In this case 40% of total service tax chargeable will be paid by service recipient and 60% to be paid by service provider (M/s Robert).

Thanks & Regards

CA Yash Goyal

AI Summary

Rent-a-cab service tax: liability depends on control, abatement and reverse charge allocation between provider and recipient. Two transactions must be analysed separately: owners-to-Robert and Robert-to-customers. If owners supply vehicles with drivers and retain control, that supply is the declared service transfer of goods by way of hiring without transfer of right to use, making owners the service providers liable to register and pay service tax (subject to small-provider exemptions). If owners supply only vehicles and control passes to Robert, the transaction is a deemed sale subject to VAT. M/s Robert supplying rent-a-cab services must register when turnover thresholds are met and may claim abatement only if cenvat credit is not availed; reverse charge and apportionment of tax between provider and recipient depend on abatement and notification conditions.