Service tax applicability to bus transporter
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
10 February 2013
dear sir/madam,
my client has 6 buses. He has entered into a contract with corporate entity where hi charges a monthly fix rate for a bus and a route is fixed for each bus.
If bus runs for extra k.m. as fixed by contract then additional fare would be charged for that excess k.m.
Now main question is that whether he would be liable to charge service tax..? If yes then at what value..?
As per reverse charge mechanism who will be liable to pay service tax..?
And he has 2 other buses also which runs on order. Whether service tax is applicable on the same or not..?
my client has 6 buses. He has entered into a contract with corporate entity where hi charges a monthly fix rate for a bus and a route is fixed for each bus.
If bus runs for extra k.m. as fixed by contract then additional fare would be charged for that excess k.m.
Now main question is that whether he would be liable to charge service tax..? If yes then at what value..?
As per reverse charge mechanism who will be liable to pay service tax..?
And he has 2 other buses also which runs on order. Whether service tax is applicable on the same or not..?
11 February 2013
If your Client is having the Permit of Contract Carriage then the same is exempt under item No.23 (b) of Notification No.25/2012-ST dated 20-06-2012.
Transport of passengers, with or without accompanied belongings, by -
(b)a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire;
In my opinion the regular use of buses is coming under the exemption Clause and the same is exempt.
Buses running on order does not fall under the definition Clause and taxable.
Thanks
Transport of passengers, with or without accompanied belongings, by -
(b)a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire;
In my opinion the regular use of buses is coming under the exemption Clause and the same is exempt.
Buses running on order does not fall under the definition Clause and taxable.
Thanks
Querist : Anonymous
Querist :
Anonymous
(Querist)
11 February 2013
Thanks Mr. Kaushik..
Now in the above case if he owned 4 buses out of 6 and take 2 buses on rent from another person where driver's salary and disal expenses will be born by owner of bus then what will be his liability towards tds for rent paid to these 2 buses..? At what rate and under which sec tds will be deductiblr..?
What will be applicability of service tax to the owner of these 2 buses who provides it on rent..? Assume that total rent exceeds Rs. 10 lakhs in a year.
In short, My client got a contract for 6 buses where he owned 4 buses of his own and give subcontract to another transporter to provide 2 buses to him at monthly fix rent..
My client is proprietor and another subcontractor who will provide 2 buses is also proprietor.
Now in the above case if he owned 4 buses out of 6 and take 2 buses on rent from another person where driver's salary and disal expenses will be born by owner of bus then what will be his liability towards tds for rent paid to these 2 buses..? At what rate and under which sec tds will be deductiblr..?
What will be applicability of service tax to the owner of these 2 buses who provides it on rent..? Assume that total rent exceeds Rs. 10 lakhs in a year.
In short, My client got a contract for 6 buses where he owned 4 buses of his own and give subcontract to another transporter to provide 2 buses to him at monthly fix rent..
My client is proprietor and another subcontractor who will provide 2 buses is also proprietor.
24 July 2025
Let's break down the service tax and TDS implications for your client’s bus transportation business based on the scenario:
1. Service Tax Applicability
For the 6 buses under contract:
If your client has a Permit of Contract Carriage for these buses, then according to Notification No. 25/2012-ST dated 20-06-2012 (Entry 23(b)), services of transporting passengers by contract carriage are exempt from service tax.
So, service tax is NOT applicable on the fixed monthly charges or extra km charges for these 6 buses if they have contract carriage permits.
For buses running “on order” (i.e., without contract carriage permit):
Such services do not qualify for exemption and thus service tax is applicable.
The transporter must charge service tax on the fare received for such buses.
2. Reverse Charge Mechanism (RCM)
Since the transportation service by contract carriage is exempt, RCM does not arise here.
For taxable transportation services, the service provider (transporter) is liable to pay service tax, not the recipient under normal circumstances.
RCM applies only on some notified services; transportation by contract carriage is generally not under RCM.
3. TDS on Rent for 2 Buses Taken on Rent
Your client is paying rent to the owner of 2 buses. Let's analyze TDS and service tax on this:
TDS Deduction:
Since rent is being paid for buses (motor vehicles), TDS is deductible under Section 194-I (Rent of immovable property) or Section 194C (Contractor services)?
Renting of vehicles is generally considered as “lease of goods” and not immovable property rent.
Typically, rent paid for motor vehicles attracts TDS under Section 194C (Contractor services) at 1% (if the payment is to an individual/HUF) or 2% (if payment is to others).
Since this is a transport contract, it falls under Section 194C.
Service Tax on Rent Paid:
The owner of the buses who provides vehicles on rent is providing a “Renting of motor vehicles service” under service tax laws.
If the rent exceeds Rs. 10 lakhs per annum, the owner is liable to pay service tax on the rent received.
Your client does not pay service tax on the rent paid (except under reverse charge if applicable, but RCM for renting motor vehicles is not applicable to a person renting vehicles for business use).
4. Summary Table
Aspect Position
Service Tax on 6 buses under contract Exempt, if contract carriage permit is there
Service Tax on buses running on order Applicable on fare charged
Reverse Charge Mechanism on transport Generally No RCM on contract carriage
TDS on rent paid for 2 buses Under Section 194C, @ 1% or 2% depending on recipient
Service Tax on rent received by owner Applicable if rent > Rs.10 lakh per annum
Additional Notes:
Make sure your client obtains contract carriage permits for all buses under contract to claim exemption.
For rented buses, ensure that contracts clearly specify responsibilities for drivers and expenses.
Maintain records of rent paid and service tax paid by vehicle owners.
1. Service Tax Applicability
For the 6 buses under contract:
If your client has a Permit of Contract Carriage for these buses, then according to Notification No. 25/2012-ST dated 20-06-2012 (Entry 23(b)), services of transporting passengers by contract carriage are exempt from service tax.
So, service tax is NOT applicable on the fixed monthly charges or extra km charges for these 6 buses if they have contract carriage permits.
For buses running “on order” (i.e., without contract carriage permit):
Such services do not qualify for exemption and thus service tax is applicable.
The transporter must charge service tax on the fare received for such buses.
2. Reverse Charge Mechanism (RCM)
Since the transportation service by contract carriage is exempt, RCM does not arise here.
For taxable transportation services, the service provider (transporter) is liable to pay service tax, not the recipient under normal circumstances.
RCM applies only on some notified services; transportation by contract carriage is generally not under RCM.
3. TDS on Rent for 2 Buses Taken on Rent
Your client is paying rent to the owner of 2 buses. Let's analyze TDS and service tax on this:
TDS Deduction:
Since rent is being paid for buses (motor vehicles), TDS is deductible under Section 194-I (Rent of immovable property) or Section 194C (Contractor services)?
Renting of vehicles is generally considered as “lease of goods” and not immovable property rent.
Typically, rent paid for motor vehicles attracts TDS under Section 194C (Contractor services) at 1% (if the payment is to an individual/HUF) or 2% (if payment is to others).
Since this is a transport contract, it falls under Section 194C.
Service Tax on Rent Paid:
The owner of the buses who provides vehicles on rent is providing a “Renting of motor vehicles service” under service tax laws.
If the rent exceeds Rs. 10 lakhs per annum, the owner is liable to pay service tax on the rent received.
Your client does not pay service tax on the rent paid (except under reverse charge if applicable, but RCM for renting motor vehicles is not applicable to a person renting vehicles for business use).
4. Summary Table
Aspect Position
Service Tax on 6 buses under contract Exempt, if contract carriage permit is there
Service Tax on buses running on order Applicable on fare charged
Reverse Charge Mechanism on transport Generally No RCM on contract carriage
TDS on rent paid for 2 buses Under Section 194C, @ 1% or 2% depending on recipient
Service Tax on rent received by owner Applicable if rent > Rs.10 lakh per annum
Additional Notes:
Make sure your client obtains contract carriage permits for all buses under contract to claim exemption.
For rented buses, ensure that contracts clearly specify responsibilities for drivers and expenses.
Maintain records of rent paid and service tax paid by vehicle owners.
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