Service tax reverse charge rent a cab

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This query is : Resolved

Sanjana (Querist)

03 October 2012 1. Company is proving Information Technology Services to its clients. The company takes Car on Rent from another company which is in the business of renting of vehicles for the pick up and drop facility of its employees. Is Service Tax Payable on Reverse Charge Mechanism on the services of Vehicle taken on Rent for this purpose? If Yes, when is the Service tax to be paid, on receipt of Invoice or on payment to the Service provider and when can CENVAT Credit on the same be taken, once the Service Provider is paid for the services or when Service Tax is paid to the Government on Reverse Charge basis or after the completion of both the aforesaid event.
Further:
a. Generally the Service Provider for Rent a Vehicle charges Service Tax at the rate of appoax 4% (when the rate was 10.3%). I am not sure about the rate now. What is to be done in such a case.
b. And what if the Service Provider is charging the entire Service Tax of 12.36% on the Vehicle taken on Rent

Mohan Babu.L

Mohan Babu.L (Expert)

04 October 2012 Hi Sanjana,
As per your query, the company is availing the services i.e., vehicle hire charges for which the reverse charge mechanism arises.
The service tax must be calculated on the basis of (total invoice amount X 12.36%) X 40%.
B.In this case we should not pay service tax to the service provider, as we are directly remitting the service tax to the government on reverse charge mechanism.

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Sanjana

Sanjana (Querist)

05 October 2012 Can CENVAT Credit on the above be taken of:
a) Service Tax paid to the Service Provider
b) Service Tax paid to the Govt on Reverse Charge

and if Yes, when can the CENVAT Credit be taken??