We are hiring Cars/Sumos for verious company`s work. All the service providers were not crossed the limit of 10 lacs in previous financial year therefore they are not registered under Service Tax. From 01.07.2012 onwords, if the service receipient is company /business entity then they have to pay Service Tax to the extent of 4.95% ( 40% 0f total Hire charges paid) under reverse charge method. Kindly clarify whether we shall take input service credit on the strength of Bank challan?
Regards,
VINAY
Company Must Pay 4.95% Service Tax on Car Hire; CENVAT Credit Eligibility for Taxi Hire Charges Unclear Under Rules. A company inquired about the applicability of service tax under the reverse charge mechanism for hiring cars, as service providers did not exceed the registration threshold. From July 1, 2012, the company must pay 4.95% service tax on hire charges. Opinions varied on whether CENVAT credit could be claimed using a bank challan. Some responses affirmed the possibility, while others highlighted that renting motor vehicles is excluded from input services under Cenvat Credit Rules, making the credit inadmissible. There was a lack of consensus on the eligibility of claiming such credit for taxi hire charges. (AI Summary)
TaxTMI 
TaxTMI 
