Rent on cab

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atul kumar goel (Querist)
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11 August 2012 sir, a proprietor ship concern registered under rent on cab service was charging service tax after availing abatment of 60% on bills raised to companies and individuals till 30.06.2012. From 01.07.2012 , wheather service tax will be paid by service receiver (company and/or individual) or by service provider as earlier.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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12 August 2012 The Service Provider can avail the abatement of 60% after 01/07/2012 also.
In that case, the service provider will have to pay 40% of service tax under reverse charge and nothing will be paid by the service provider.
Or
On the other hand, If Service provider does not wish to avail the abatement then he will have to pay 60% of service tax and remaining 40% shall be paid by the service receiver under reverse charge.

atul kumar goel

atul kumar goel (Querist)
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12 August 2012 Thanks Amit sir, i think that there was some clerkial mistake in your reply. i think that you want to say that if service provider take abatement then service receiver has to pay service tax on 40% and no tax will be paid by provider. Further , i want to know that lf services are being provided to individuals rather say numbers of small individuals, then also service provider is not liable to pay taxes.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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21 July 2025 You're right to seek clarification — this was a period of significant change in Service Tax laws in India due to the introduction of the Negative List regime from 1st July 2012.

Let’s break this down for better clarity based on the renting of motor vehicles (cabs) for transport of passengers:

✅ Service Tax Treatment on Cab Rent — After 01.07.12
1. If Service Provider Takes Abatement (60%)
Only 40% of the value is taxable.

Reverse charge mechanism (RCM) applies if the service is provided to a body corporate (like a company).

Party Taxable Portion Tax Liability
Service Provider NIL ❌ Not liable
Service Receiver 40% ✅ Liable under RCM

This means: Only the service receiver (company) pays service tax on 40% of the invoice value.

2. If Abatement Is Not Availed
Then 100% of value is taxable.

The tax is split between provider and receiver under RCM.

Party Taxable Portion Tax Liability
Service Provider 60% ✅ Pays 60% of full service tax
Service Receiver 40% ✅ Pays 40% of full service tax

⚠️ What if You Provide Cab Services to Individuals (Not Companies)?
In that case, RCM does not apply.

So:

Service Receiver Reverse Charge Applies? Who Pays Tax?
Company ✅ Yes Both (RCM split)
Individual ❌ No ✅ Only the provider

So if you're providing cab services to individual customers, then as the service provider, you must pay full service tax (after abatement, if availed).

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