Servive Tax On Rent-Cab-Motor Operator

[VAMSI KRISHNA]

Sir,

'ABC Ltd' is a seven star deluxe hotel (Providing accomidation as well as food). 'B' is a customer who check in hotel. 'B' whants to go outside for to attened a meeting which is 200 kms from hotel. 'B' asked hotel to arrange transportation for the same. 'ABC Ltd' does not having any owned cabs so they approched 'C' for to arrange the cab (Car). 'C' sent the car to hotel and 'B' attended meeting and come back to hotel. 'B' not paid any payment to 'C'. 'C' billed to 'ABC Ltd' and 'ABC Ltd' billed to 'B'.

Now my Doubt is???

1) if 'C' is individual.... as per 68(2) of finance act 1994.. who is going to liable to pay tax ??????

2) whether we can treat 'ABC Ltd' as a rent a cab operator for applicability of 68(2)??

[KASTURI SETHI]

Undoubtedly, education guide has no legal force but Board's Expert brain is behind this clarification/guidance. It is not by Tom, Dick and Harry.

[HARSHAD BHAMRE]

Dear Sir,

I go through the above discussion and found, some thing I am doing wrong for my case , please suggest me if I am wrong .

we are Private Limited Company .we did contract with vendor( proprietor) for transportation of employee. vendor is register in Service tax. he is not charging service tax on bill given below declaration. and we are providing Service tax 40% of bill amount under RCM is it correct or we are doing wrong.

Please Suggest

Harshad Bhamre

[HARSHAD BHAMRE]

We paid 40% service tax under RCM to the government on vendor bill. as he not charge service tax and given above declaration.

[VAMSI KRISHNA]

Respected HARSHAD BHAMRE ji,

To the best of my knowledge ..... creation of 40% tax under RCM in your case is valid only.....

if your business is also rent-a-cab operator then only RCM provisions not applicable......

Thanks

[KASTURI SETHI]

Sh.Harshad Bhamre Ji,

You are absolutely on the right track. Rightly paying Service Tax on the abated value i.e. 40%. Your firm is covered under serial no. 7(a) of Notification No.30/12-ST as amended.

[HARSHAD BHAMRE]

Dear Sir,

KASTURI SETHI & VAMSI KRISHNA

Thanks for replay .

[VAMSI KRISHNA]

'ABC Ltd' Registered with dept as a service provider of following services and paying service collecting service tax individually....

Service	Rate	% of abatement	% of Taxable
Service tax SPA	14	0%	100%
Service tax Business Centre	14	0%	100%
Service tax Limousine	5.6	60%	40%
Service Tax Laundry	14	0%	100%
Service Tax Internet	14	0%	100%
Service tax Telephones	14	0%	100%
Service tax Dry Cleaning	14	0%	100%
Service tax Rooms	8.4	40%	60%
Service tax Food	5.6	60%	40%
Service tax Beverages	5.6	60%	40%
Service tax Misc(O)	14	0%	100%
Service tax Food Package	8.4	40%	60%

But 'C' issued invoice in the name of 'ABC Ltd' and 'C' contended that service receiver is a hotel industry sooo RCM provisions will attract.... so 'C' not collecting any tax from 'ABC Ltd' ('C' availed abatement and he indicated in inovice that service receiver is liable to pay under RCM.....

But 'ABC Ltd' contended that we are registred with service tax dept not only as a service providers of hotel but also for 'Service provider of rent a cab' so RCM provisions are not applicable...

Both parties contention is correct only in my view.

'ABC Ltd' if the same service is received for other than guest transportation..... 'ABC Ltd' paying service tax under RCM contended that they are not in similar line of business..... if they received for guest transportation they are not paying service tax under RCM since they are in similar line of business.....

So in the contention of 'ABC Ltd' one service is going to taxable (if 'ABC Ltd' not used for to guest transportation) and same service is not taxable (used for Guest transportation) at allll.....

in "C" point of view service receiver is not in similar line of business so RCM is applicable (100% since he availed abatement).

Whose point of view is correct sir

Thanksss

[Ganeshan Kalyani]

Who will be ready to pay tax is government comes and asks you. That is why tax is a levy and not request.

In this query, it is evident that B has availed the service and ABC has just arranged for the car from C. Thus service provider is C and receiver of service is B and B being an individual not liable to service tax, the provider of service being C has to charge the tax on his invoice and pay to the government.

[KASTURI SETHI]

Perfectly explained by Sh. Ganeshan Kalyani, Sir. Words fail to express beauty in interpretation and understanding the law. Kudos to him.

[VAMSI KRISHNA]

Respected Ganeshan Kalyani Ji,

'C' Billing to 'ABC Ltd' and 'ABC Ltd' Billing to their guest after inclusion of their profit.

for example..

'B' billing to 'ABC Ltd' as follows:

Service Value		10000
Service Tax		0
Total		10000
Note: Service Tax need to be payable by service receiver as per the provisions of 68(2) of finance act 1994

'ABC Ltd' Billing to 'B' as follows:

Service Value		15000
Service Tax		900
Total		15900

'ABC Ltd' included 5000 as a profit and they collected tax from their guest as a output tax liability (under foreward charge).... But service provided by 'C' to 'ABC Ltd' is not going to taxable at all since......

'ABC Ltd' Contended that we are in similar line of business then RCM not applicable...... of course 'ABC Ltd' if the same service is used from 'C' for other than guest purposes they paying service tax under RCM....

'C' Contended that RCM is applicable since service receiver is Hotel industry...... 'C' not collecting service tax from 'ABC Ltd' (irrespective of for what purpose 'ABC Ltd' avalied)

Sir,,, as per my knowledge Customers Customer is not our Customer... So in this case we should have to treat two seperate services.....

1) service provided by 'C' to 'ABC Ltd'

2) Service Provided by 'ABC Ltd' to 'B'

Thanks

[KASTURI SETHI]

'C' has no link with 'B'. B is totally out of picture for C. Both have nothing to do with each other. C has provided 'hiring service' to ABC Ltd.which is declared service under Section 66 (E)(f). What ABC Ltd. charges from 'B' and on what account ? ABC Ltd. are themselves are responsible.

AI Summary

Reverse charge on rented passenger vehicle services: hotels generally liable unless acting as rent a cab operators.
The hiring of a passenger vehicle by an individual operator to a hotel for a guest is a declared service; when the provider is an individual and the receiver is a corporate business not in the similar line of business, the hotel (service receiver) is ordinarily liable to pay service tax under the reverse charge mechanism. If the hotel demonstrably operates as a rent a cab provider for the transaction, the similar line of business exception applies and reverse charge does not attach. CENVAT credit availability for the hotel must be tested against Board guidance and CENVAT rules and may be restricted.