An assessee is a pvt ltd co. It is receiving renting of motor vehicle service from an individual who is a small service provider and not registered under service tax. Monthly bill raised by individual of Rs. 30,000/-.

What will be the service tax liability on service provider as well as service receiver after 01.07.2012 in above case ?

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Assumed that the service provider comes under SSI Exemption limit and hence he is not raising service tax in his invoice.  But as a service receipient, after 01.07.2012, the assessee is liable to pay 60% of the service tax on the invoice value.  Say Rs. 10,000/- is the invoice value, then the assessee is liable to pay Rs. 742/-  (10000*12.36%*60%)..  Also refer notification no. 30/2012 ST. 


Also refer to the Service tax guidance note issued by the CBEC in this regard.  Relevant question and answer is pasted below.

10.1.3 If the service provider is exempted being a SSI (turnover less than Rs 10 lakhs),

how will the reverse charge mechanism work?

The liability of the service provider and service recipient are different and independent of

each other. Thus in case the service provider is availing exemption owing to turnover being

less than Rs 10 lakhs, he shall not be obliged to pay any tax. However, the service recipient

shall have to pay service tax which he is obliged to pay under the partial reverse charge



In respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value, recepant can pay 100% service tax at this services and non abated value on 40% of the total value with effect from 1.7.2012.


Please note such payment of service tax under reverse charge mechanism is eligible for cenvat credit.  He (service receiver) has to pay the amount by cash and can adjust in other services provided such input services are relating to his output tax service.


The 10 lacs exemption is not applicable to service receiver.


Yes I too agree with the above views.
Sr. Executive - Finance & Accounts

The service receiver has to pay the amount irrespective of the fact that service provider is a SSI unit or a LTU.

Hence, the above views are correct. 


The notification gives two categories one on abated value and other on non abated value.

Accordingly in which category I fall in above case and how much amount of service tax I have to pay as a service receiver on invoice received of Rs.30,000/- ?


Service tax Notification No. 30/2012 dated 20.06.2012


In both the situations you need to pay service tax on 40% of the value of the car hire charges, which in your case will be on Rs 12,000/-. Hope you are clear now.

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Dear Members and Visitors,

As per amended and new service tax provisions, renting a motor car for passengers is liable to service tax under two options:

1) 100% service tax to be paid by service Recipient (SR) on 40% value of service 

2) 60% of service tax to be paid by service provider(SP) and 40% of service tax by SR.


I didnt find any logic for giving second option. Why would any body would choose second option. Is there any Logic or specific condition where second option is useful.

Opinions are welcome by all experts.

Thank you in advance


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