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Service tax liability on renting a car to travelling company

Sonali (not yet) (48 Points)

28 October 2015

If we are a travelling management company engaged in Rent a cab business, but if in some cases we are renting a car to another "Travelling company" and getting only a rent from them and they rent or hire that vehical further as their business....so here are we liable for Service tax & if yes then under what provision & what will be the rate rate

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3 Replies

sambhaji (assistant manager) (43 Points)
Replied 28 October 2015

Hiring of services above Rs. 5000/- TDS is to be deducted @ 10%....

1 Like

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 29 October 2015

You letting out on rent to another travelling company is taxable as service under the same provision of rent a cab service. Here the only relaxation is the receiver travelling co can take input of tax that you pay. There is no other relaxation. It is a declared service and hence taxable. However there is abatement of 60% and that too for renting a motor cab ( motor vehicle designed to carry not more than 6 passangers). If it is motor vehicle other than motor cab then rate will be 14% or else 5.6% . You are not entitled to reverse charge as you are a company.

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sameer (charted accountant) (22 Points)
Replied 31 October 2015

rent a cab operator is eligible for an abatement of 60 % of his bill that means Taxable value is only 40%. in this case he cannot claim cenvat credit of input services used for providing such rent a cab servises.if the rent a cab operator is an individual or firm and the service receiver is a company ... then reverse charge mechanism shall be applicable where full service tax is to be paid by the company however if the service provider does not opt for 60% abatement then it will become Partial Reverse Charge Mechanism and service provider shall 50% of tax and service receiver conpany shall pay balance 50 perc to dept if a rent a cab operator provides services to an Edicational Institution covered in the negative list for providing transportaton services to students ir staff or faculty then it is Fully Exempt as per SNo 9 of Mega Exemption Notification It is not a declared service rent a cab service is NOT A DECLARED service under sec 66E