Service tax on rent-a-cab service
This query is : Resolved
14 August 2013
Suppose a Rent-a-Cab Service provider (other than a company) raises a bill of Rs. 10,000 and charges Service Tax thereon @ 4.944%. Hence, the total bill amount comes to be Rs. 10,494.
My questions are:
1. Whether he has taken the abatement?
2. What will be our Service tax Liability under Reverse Charge(as a Corporate entity) to:
a. The Government and
b. The Service Provider?
Now, what if he charges Service Tax @ 12.36%? what would be our liability.
Please help.
Thank you.
My questions are:
1. Whether he has taken the abatement?
2. What will be our Service tax Liability under Reverse Charge(as a Corporate entity) to:
a. The Government and
b. The Service Provider?
Now, what if he charges Service Tax @ 12.36%? what would be our liability.
Please help.
Thank you.
15 August 2013
If receive receiver is a corporate business entity and service provider is non-corporate entity, the RCM is applicable and he receiver of service is liable to pay service tax @ 40% of 12.36% irrespective of the fact that he has taken abatement.
Please check you can also avail abatement if you satisfy other conditions.
disclaimer- all answers are given as per the facts narrated by you. Answer may differ after study of full facts/statements/agreements etc. involved in the case
Please check you can also avail abatement if you satisfy other conditions.
disclaimer- all answers are given as per the facts narrated by you. Answer may differ after study of full facts/statements/agreements etc. involved in the case
15 August 2013
Thank you sir for your reply.
so that means the Service Receiver is going to pay the 40% of Service tax to the government irrespective of the fact that the SP has charged the same in the Bill?
so that means the Service Receiver is going to pay the 40% of Service tax to the government irrespective of the fact that the SP has charged the same in the Bill?
24 July 2025
Exactly! Here’s how it works for **Rent-a-Cab services** under Service Tax (pre-GST):
---
### 1. Abatement & Rate charged by Rent-a-Cab Service Provider:
* Rent-a-Cab service providers (non-corporate entities) are eligible for **75% abatement** on the value of service (meaning only 25% of the gross amount is taxable).
* So, the effective service tax rate after abatement is:
* 12.36% × 25% = 3.09% approximately (which rounds close to 4.944% on the gross amount, depending on calculations and exact taxable value).
* If the service provider charges service tax at **4.944%**, it indicates he has applied the abatement.
* If he charges **12.36%**, it means no abatement has been taken.
---
### 2. Reverse Charge Mechanism (RCM) liability for Corporate Entity (Service Receiver):
* When a corporate entity receives Rent-a-Cab service from a **non-corporate service provider**, RCM applies.
* The corporate entity (service receiver) has to pay service tax on **40% of the gross value** of service received, at the full rate of 12.36%.
That is:
Service tax liability = 12.36% × 40% × Service value
* The amount already charged by the service provider does **not** reduce your liability under RCM.
* You must pay service tax on the specified 40% value **to the government**, regardless of the service provider charging service tax or not.
---
### 3. Effect of Service Provider charging service tax:
* If the service provider charges service tax and collects it from you, you are not relieved from paying RCM tax on your portion.
* In practice, this may result in **double payment** of service tax, but legally the obligation to pay under RCM rests with you (corporate entity).
* You can claim Input Tax Credit on service tax paid under RCM (if you are eligible), thereby reducing your effective tax burden.
---
### Summary:
| Scenario | Your Liability (Corporate Entity) |
| --------------------------------------------------- | --------------------------------------------------------- |
| Service provider charges 4.944% (abatement applied) | Pay service tax under RCM on 40% of service value @12.36% |
| Service provider charges 12.36% (no abatement) | Pay service tax under RCM on 40% of service value @12.36% |
---
**So yes, your understanding is correct:**
You must pay **40% of 12.36%** of the value under RCM to the government, irrespective of whether the service provider has charged you service tax or not.
---
If you want, I can help calculate the exact liability based on your bill amount. Would you like me to?
---
### 1. Abatement & Rate charged by Rent-a-Cab Service Provider:
* Rent-a-Cab service providers (non-corporate entities) are eligible for **75% abatement** on the value of service (meaning only 25% of the gross amount is taxable).
* So, the effective service tax rate after abatement is:
* 12.36% × 25% = 3.09% approximately (which rounds close to 4.944% on the gross amount, depending on calculations and exact taxable value).
* If the service provider charges service tax at **4.944%**, it indicates he has applied the abatement.
* If he charges **12.36%**, it means no abatement has been taken.
---
### 2. Reverse Charge Mechanism (RCM) liability for Corporate Entity (Service Receiver):
* When a corporate entity receives Rent-a-Cab service from a **non-corporate service provider**, RCM applies.
* The corporate entity (service receiver) has to pay service tax on **40% of the gross value** of service received, at the full rate of 12.36%.
That is:
Service tax liability = 12.36% × 40% × Service value
* The amount already charged by the service provider does **not** reduce your liability under RCM.
* You must pay service tax on the specified 40% value **to the government**, regardless of the service provider charging service tax or not.
---
### 3. Effect of Service Provider charging service tax:
* If the service provider charges service tax and collects it from you, you are not relieved from paying RCM tax on your portion.
* In practice, this may result in **double payment** of service tax, but legally the obligation to pay under RCM rests with you (corporate entity).
* You can claim Input Tax Credit on service tax paid under RCM (if you are eligible), thereby reducing your effective tax burden.
---
### Summary:
| Scenario | Your Liability (Corporate Entity) |
| --------------------------------------------------- | --------------------------------------------------------- |
| Service provider charges 4.944% (abatement applied) | Pay service tax under RCM on 40% of service value @12.36% |
| Service provider charges 12.36% (no abatement) | Pay service tax under RCM on 40% of service value @12.36% |
---
**So yes, your understanding is correct:**
You must pay **40% of 12.36%** of the value under RCM to the government, irrespective of whether the service provider has charged you service tax or not.
---
If you want, I can help calculate the exact liability based on your bill amount. Would you like me to?
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