Service tax payable for rent a cab services
This query is : Resolved
07 September 2012
1) If service provider is availing abatement @40% under service tax law for rent-a-cab service then whether service tax is payable under reverse charge mechanism by service receiver?
2) What is the actual meaning of abated value & non-abated value under reverse charge mechanism for rent-a-cab services?
2) What is the actual meaning of abated value & non-abated value under reverse charge mechanism for rent-a-cab services?
07 September 2012
1) Reverse charge mechanism is applicable and service receiver is liable to pay 100%
2)Abated value means value on which no service tax require to paid.
2)Abated value means value on which no service tax require to paid.
08 September 2012
1)If service provider providing a rent-a-cab service & is a body corporate & availing abatement then whether service receiver is liable to service tax under reverse charge mechanism? If service provider is not a body corporate then?
2) If service provider is not a body corporate & he is also not availing any abatement i.e., No service tax is charged by him in the invoice, then under reverse charge mechanism whether service receiver is liable to pay service tax?
3) whether service receiver is supposed to take any documents from service provider is service provider is availing abatement or not?
2) If service provider is not a body corporate & he is also not availing any abatement i.e., No service tax is charged by him in the invoice, then under reverse charge mechanism whether service receiver is liable to pay service tax?
3) whether service receiver is supposed to take any documents from service provider is service provider is availing abatement or not?
24 July 2025
Here’s a detailed clarification regarding **Service Tax on Rent-a-Cab services** under the **Reverse Charge Mechanism (RCM)** during the **pre-GST regime**, particularly after the introduction of Notification No. **30/2012-ST**, effective **1st July 2012**:
---
### ✅ 1. **Is Reverse Charge Mechanism (RCM) applicable if the service provider avails abatement (i.e., charges tax on 40% of value)?**
Yes, **RCM is applicable**.
* If the **service provider is NOT a body corporate** (e.g., individual, partnership firm) **and** the **service receiver IS a body corporate**, then:
* **Reverse charge applies**.
* The **liability splits as follows**:
* **Service provider**: pays service tax on **60% of the full rate (i.e., on abated value)**.
* **Service receiver**: pays the **remaining 40%** of the service tax (i.e., under RCM).
However, if the **service provider avails abatement**, he cannot **claim CENVAT credit** on inputs.
---
### ✅ 2. **Meaning of "Abated" and "Non-abated" Value in RCM for Rent-a-Cab:**
| **Term** | **Meaning** |
| ---------------- | ---------------------------------------------------------------------------- |
| **Abated Value** | Value after applying abatement (e.g., only 40% of invoice value is taxable). |
| **Non-Abated** | Full value is taxable (no abatement taken). |
#### → Under abated value:
* Tax is computed on **40% of gross amount charged**.
* Service provider **cannot claim CENVAT credit**.
#### → Under non-abated value:
* Tax is computed on **100% of gross amount**.
* Service provider **can claim CENVAT credit**.
---
### ✅ 3. **Does the reverse charge apply when the service provider is a body corporate?**
* **If the service provider is a body corporate** (e.g., Pvt Ltd company):
* Then **RCM does NOT apply**.
* Entire service tax is payable by the **service provider** only.
---
### ✅ 4. **If service provider is not a body corporate and doesn’t charge service tax (non-abated or abated), is the service receiver still liable under RCM?**
Yes, **if the provider is an individual or partnership firm**, and the **receiver is a body corporate**, then the receiver is **liable under RCM**, **irrespective of whether tax is charged** in the invoice or not.
This means:
* Even if the service provider **doesn’t charge tax**, the **service receiver must pay tax** under RCM.
* Applicable rates would depend on **abatement availed** or not.
---
### ✅ 5. **Should the service receiver collect any documents from the service provider to verify abatement claim?**
Yes, **documentation is recommended**.
The service receiver should:
* Obtain a **declaration from the service provider** stating whether they have **availed abatement** under Notification 26/2012.
* This is important to determine the **extent of RCM liability** (partial vs. full liability).
---
### 🔍 Summary Table:
| **Provider Type** | **Abatement Availed** | **Receiver Type** | **RCM Applicability** |
| ------------------------ | --------------------- | ----------------- | --------------------------------------- |
| Individual / Partnership | Yes | Body Corporate | Partial RCM (60% SP + 40% SR) |
| Individual / Partnership | No | Body Corporate | Full RCM (100% by SR) |
| Body Corporate | Irrespective | Any | No RCM – Entire tax by service provider |
---
Let me know if you want a **sample declaration format** from the service provider regarding abatement for compliance!
---
### ✅ 1. **Is Reverse Charge Mechanism (RCM) applicable if the service provider avails abatement (i.e., charges tax on 40% of value)?**
Yes, **RCM is applicable**.
* If the **service provider is NOT a body corporate** (e.g., individual, partnership firm) **and** the **service receiver IS a body corporate**, then:
* **Reverse charge applies**.
* The **liability splits as follows**:
* **Service provider**: pays service tax on **60% of the full rate (i.e., on abated value)**.
* **Service receiver**: pays the **remaining 40%** of the service tax (i.e., under RCM).
However, if the **service provider avails abatement**, he cannot **claim CENVAT credit** on inputs.
---
### ✅ 2. **Meaning of "Abated" and "Non-abated" Value in RCM for Rent-a-Cab:**
| **Term** | **Meaning** |
| ---------------- | ---------------------------------------------------------------------------- |
| **Abated Value** | Value after applying abatement (e.g., only 40% of invoice value is taxable). |
| **Non-Abated** | Full value is taxable (no abatement taken). |
#### → Under abated value:
* Tax is computed on **40% of gross amount charged**.
* Service provider **cannot claim CENVAT credit**.
#### → Under non-abated value:
* Tax is computed on **100% of gross amount**.
* Service provider **can claim CENVAT credit**.
---
### ✅ 3. **Does the reverse charge apply when the service provider is a body corporate?**
* **If the service provider is a body corporate** (e.g., Pvt Ltd company):
* Then **RCM does NOT apply**.
* Entire service tax is payable by the **service provider** only.
---
### ✅ 4. **If service provider is not a body corporate and doesn’t charge service tax (non-abated or abated), is the service receiver still liable under RCM?**
Yes, **if the provider is an individual or partnership firm**, and the **receiver is a body corporate**, then the receiver is **liable under RCM**, **irrespective of whether tax is charged** in the invoice or not.
This means:
* Even if the service provider **doesn’t charge tax**, the **service receiver must pay tax** under RCM.
* Applicable rates would depend on **abatement availed** or not.
---
### ✅ 5. **Should the service receiver collect any documents from the service provider to verify abatement claim?**
Yes, **documentation is recommended**.
The service receiver should:
* Obtain a **declaration from the service provider** stating whether they have **availed abatement** under Notification 26/2012.
* This is important to determine the **extent of RCM liability** (partial vs. full liability).
---
### 🔍 Summary Table:
| **Provider Type** | **Abatement Availed** | **Receiver Type** | **RCM Applicability** |
| ------------------------ | --------------------- | ----------------- | --------------------------------------- |
| Individual / Partnership | Yes | Body Corporate | Partial RCM (60% SP + 40% SR) |
| Individual / Partnership | No | Body Corporate | Full RCM (100% by SR) |
| Body Corporate | Irrespective | Any | No RCM – Entire tax by service provider |
---
Let me know if you want a **sample declaration format** from the service provider regarding abatement for compliance!
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