Service tax on depreciation and maintenance charges paid to

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2015 Dear all,

Having an Planning
we are paying EMI to All our employees and Deducting TDS under 194c as a Rent a Cab service. Employees are giving bills for the same. and we are Paying service tax on that amount.

Now we want to pay it as a maintenance charges and Depreciation.
to manage our service tax liability.
Kindly Suggest.

Arun Kumar Singh

Arun Kumar Singh (Expert)

21 September 2015 The cenvat credit will not be applicable on Rant-a-cab service, you can take the credit on maintenance service.

Querist : Anonymous

Querist : Anonymous (Querist)

22 October 2015 Hello Arun Ji,
Please Reply For Above Planning
Arihant

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

24 July 2025 Here’s a clear breakdown for your situation about **service tax on depreciation and maintenance charges paid to employees for rent-a-cab services**:

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### Key Points:

1. **Rent-a-cab service by employees:**
If your employees are providing vehicles as part of a rent-a-cab service and issuing bills for that, the service tax on their invoices **must be paid** by you as the recipient of the service (reverse charge mechanism).

2. **Deducting TDS under Section 194C:**
TDS on contract payments like rent-a-cab services is correct and has to be deducted.

3. **Wanting to reclassify payments as ‘maintenance charges’ and ‘depreciation’:**

* Service tax liability arises based on the nature of the service provided, **not just the label given to the charges**.
* If the payment is genuinely for rent-a-cab services, it is taxable under that category.
* Simply reclassifying the rent as “maintenance charges” or “depreciation” to reduce service tax liability is **not permissible**.
* **Depreciation is not a service** but an accounting concept and cannot be billed separately attracting service tax.

4. **CENVAT Credit:**

* You **cannot avail CENVAT credit on rent-a-cab services** as per service tax rules.
* You **can avail CENVAT credit on genuine maintenance services** (like repairs, servicing), if separate bills are raised for those.

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### What should you do?

* Continue to pay **service tax on rent-a-cab services as per rules**.
* If you want to reduce service tax liability legitimately, you may consider:

* **Separately contracting for vehicle maintenance services** (with proper bills) where service tax is payable, and credit can be taken.
* You **cannot claim service tax on ‘depreciation’** because it’s not a service provided.

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### Conclusion:

Reclassifying rent-a-cab payments as depreciation or maintenance charges just to reduce service tax liability is **not allowed**. The liability depends on the actual service rendered, not on how you label the charges.

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If you want, I can help you draft a proper contract or suggest how to segregate services for compliance. Would you like that?

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