Service tax on depreciation and maintenance charges paid to
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.
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.
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
Please Reply For Above Planning
Arihant
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**:
---
### 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.
---
### 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.
---
### 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.
---
If you want, I can help you draft a proper contract or suggest how to segregate services for compliance. Would you like that?
---
### 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.
---
### 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.
---
### 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.
---
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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