reverse charge rent a cab

[Arihant Shah]

Please update the details of reverse charge applicable on Cab Hiring Services. Is there any critiria of small cab (taxi) / big cab (buses) for taxability.

[Guest]

No, there is any critiria of small cab (taxi) / big cab (buses) for taxability.

If any services are availed from  ”RENTING/HIRING OF MOTOR VEHICLE” (eg: Car/taxi hiring, Bus hiring etc) where the service provider is Individual, HUF, Partnership firm, or AoP, then we (i.e. service receiver) will have to pay service tax  on  40% of Taxable Amount to instead of paying service provider.

[Vijay kumar]

Please refer to Nofn.30/2012-ST dt.20.6.2012. Firstly, there is no distinction between small cab or big cab in as much as the tax is on "renting of motor vehicle designed to carry passengers". Secondly, to attract the reverse charge, certain other conditions are required to be satisfied viz. (i) the service receiver should be a person who is not in the similar line of business; (ii) the service provider should be an individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons; and (iii) the service receiver should be a business entity registered as body corporate. Only then the question of reverse charge comes up. Again, under this, there are two situations for which pl refer to sl.no.7 of the sais Nofn.. Partial reverse charge of 40% is applicable to service receiver if tax is paid on the non-abated value.If tax is to be paid on the abated value (which means no cenvat credit is availed by the service provider to provide such service) of 40% of the taxable value (Nofn.26/2006-ST refers), the service receiver has to pay 100% of the tax.  However, even if one of the above said conditions is not satisfied, 100% service tax leviable has to be paid by the service provider, subject of course to the taxability otherwise.

AI Summary

Reverse charge on cab hiring shifts tax liability to corporate receivers when providers are individuals or firms not in similar business. Reverse charge applies to renting/hiring of motor vehicles when services are received from Individuals, HUFs, partnerships or AOPs and the receiver is a registered body corporate not in the same line of business. No distinction exists between small cabs and larger passenger vehicles. If tax is on the non abated value a partial reverse charge arises and the receiver pays a portion; if tax is on the abated value (provider has not availed cenvat credit) the receiver must pay the full tax. Otherwise, the provider pays the tax subject to taxability.