Query on renting a cab service

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 June 2015 Sir, i have just gone through the article
on impact of Service tax on OlA and UBER cabs.. in Tax guru.in

1) if Aggregator is acting as a Rent a cab service provider for 1000/- in which his commission is 100.. he has to pay service tax on his 100 and also on 900 rs of cab owner due to reverse charge mechanism.

2) If aggregator is acting as agent for procuring business for cab driver : charge by driver is 1000 rs out of which commision of aggregator is 100/- . here also the aggregator has to pay service tax on his 100 and also on 900 of cab owner..

What i understood is above .. is that right?? its confusing me...

Please reply soon..

thank u ..

Querist : Anonymous

Querist : Anonymous (Querist)

29 June 2015 Plss reply sir....

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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10 August 2024 Your understanding of the service tax implications for cab services involving aggregators like OLA and UBER involves two key aspects: whether the aggregator is acting as a "Rent-a-Cab" service provider or merely an agent for procuring business. Here's a clarification of both scenarios under service tax regulations:

### 1. Aggregator as a Rent-a-Cab Service Provider

**Scenario:** The aggregator is acting as a Rent-a-Cab service provider. The total amount charged to the customer is ₹1000, out of which the aggregator’s commission is ₹100, and the remaining ₹900 is paid to the cab owner.

**Service Tax Implications:**
- **On Commission:** The aggregator has to pay service tax on the commission amount of ₹100 at the applicable rate.
- **On Amount Paid to Cab Owner:** Since the aggregator is providing the Rent-a-Cab service to the customer, the entire ₹1000 (including the ₹900 paid to the cab owner) is considered as the service value. Under the Reverse Charge Mechanism (RCM), the cab owner is liable to pay service tax on the ₹900 amount if the cab owner is not registered under service tax.

**In Summary:**
- Aggregator pays service tax on their commission of ₹100.
- Under RCM, the cab owner would need to pay service tax on ₹900 if they fall under the RCM provisions.

### 2. Aggregator as an Agent for Procuring Business

**Scenario:** The aggregator is acting merely as an agent for procuring business for the cab driver. The total charge by the driver to the customer is ₹1000, and the aggregator’s commission is ₹100.

**Service Tax Implications:**
- **On Commission:** The aggregator is required to pay service tax on the commission of ₹100 at the applicable rate.
- **On Amount Paid to Cab Owner:** In this case, since the aggregator is only an agent and not providing the actual Rent-a-Cab service, the service tax on the ₹900 paid to the cab owner is not the aggregator's responsibility under service tax. The cab owner may need to account for their own service tax obligations.

**In Summary:**
- Aggregator pays service tax on the commission of ₹100.
- Service tax on ₹900 is the responsibility of the cab owner, not the aggregator.

### Key Points to Consider

- **Reverse Charge Mechanism (RCM):** If the cab owner is liable to pay service tax under RCM, they must account for it in their service tax returns. Aggregators are responsible for service tax on their commissions.
- **Classification of Services:** Proper classification of services is crucial. The nature of the service provided by the aggregator (whether as a Rent-a-Cab service provider or merely an agent) determines the applicable service tax obligations.

### Conclusion

- If the aggregator is directly providing Rent-a-Cab services, service tax is applicable on the entire ₹1000, with the cab owner responsible for the tax on ₹900 under RCM.
- If the aggregator is only an agent, service tax is applicable only on the ₹100 commission, with the cab owner responsible for the tax on ₹900.

For accurate compliance, ensure to consult the latest service tax regulations or a tax professional to clarify any specific nuances related to your business operations.

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