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Service tax on renting of motor vehicle

Govind Inani (Business) (203 Points)

16 July 2012

An assessee is a pvt ltd co. It is receiving renting of motor vehicle service from an individual who is a small service provider and not registered under service tax. Monthly bill raised by individual of Rs. 30,000/-.

What will be the service tax liability on service provider as well as service receiver after 01.07.2012 in above case ?

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22 Replies

Mallikharjun (Deputy Manager) (304 Points)
Replied 16 July 2012

Assumed that the service provider comes under SSI Exemption limit and hence he is not raising service tax in his invoice. But as a service receipient, after 01.07.2012, the assessee is liable to pay 60% of the service tax on the invoice value. Say Rs. 10,000/- is the invoice value, then the assessee is liable to pay Rs. 742/- (10000*12.36%*60%).. Also refer notification no. 30/2012 ST.

Also refer to the Service tax guidance note issued by the CBEC in this regard. Relevant question and answer is pasted below.

10.1.3 If the service provider is exempted being a SSI (turnover less than Rs 10 lakhs),

how will the reverse charge mechanism work?

The liability of the service provider and service recipient are different and independent of

each other. Thus in case the service provider is availing exemption owing to turnover being

less than Rs 10 lakhs, he shall not be obliged to pay any tax. However, the service recipient

shall have to pay service tax which he is obliged to pay under the partial reverse charge

mechanism.

Arun Kumar Singh (GST Advocate) (15188 Points)
Replied 17 July 2012

In respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value, recepant can pay 100% service tax at this services and non abated value on 40% of the total value with effect from 1.7.2012.

RENGARAJ R.K (ADVOCATE) (7557 Points)
Replied 17 July 2012

Please note such payment of service tax under reverse charge mechanism is eligible for cenvat credit. He (service receiver) has to pay the amount by cash and can adjust in other services provided such input services are relating to his output tax service.

The 10 lacs exemption is not applicable to service receiver.

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 17 July 2012

Yes I too agree with the above views.

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 17 July 2012

The service receiver has to pay the amount irrespective of the fact that service provider is a SSI unit or a LTU.

Hence, the above views are correct.

Govind Inani (Business) (203 Points)
Replied 18 July 2012

The notification gives two categories one on abated value and other on non abated value.

Accordingly in which category I fall in above case and how much amount of service tax I have to pay as a service receiver on invoice received of Rs.30,000/- ?

Arun Kumar Singh (GST Advocate) (15188 Points)
Replied 18 July 2012

Service tax Notification No. 30/2012 dated 20.06.2012

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 18 July 2012

In both the situations you need to pay service tax on 40% of the value of the car hire charges, which in your case will be on Rs 12,000/-. Hope you are clear now.

1 Like

anil (na) (31 Points)
Replied 05 August 2012

Dear Members and Visitors,

As per amended and new service tax provisions, renting a motor car for passengers is liable to service tax under two options:

1) 100% service tax to be paid by service Recipient (SR) on 40% value of service

2) 60% of service tax to be paid by service provider(SP) and 40% of service tax by SR.

I didnt find any logic for giving second option. Why would any body would choose second option. Is there any Logic or specific condition where second option is useful.

Opinions are welcome by all experts.

Thank you in advance

1 Like

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 06 August 2012

Very useful discussion, Friends and Experts.

So if the invoice value is 30,000, the service receiver has to pay 30000*40%*12.36% = 1483.

Is it then that the service provider will be paid 30,000 less 1483 = 28517.

I am ignoring the TDS rules here for keeping it simple.

Regards,

1 Like

Venkatesan Sudharsan (Partner) (28 Points)
Replied 06 August 2012

Please note that Notification No.30/2012 does not give any option to choose in respect of renting of motor vehicle to carry passengers. On the one hand, it charges ST on the SR @ 100% on the abated value i.e, 60%. On the other hand, it charges ST on both SP & SR in 60:40 ratio on the non-abated value. The intention of the Government seems to be that in case services provided by Individuals, Firms, HUF, AOPS to body corporates, there shall not be any forego in the service tax amount. To put in simple terms, the total ST of 12.36% shall be borne by the SP and SR in the ratio of 2.9664:9.3936 respectively. It is worked out as follows:

Service Provider: 100 x 40% x 12.36% x 60% = 2.9664% (as per clause (b))

Service Receiver: 100 x 60% x 12.36% x 100% (as per clause (a)) = 7.416% + 100 x 40% x 12.36% x 40% = 1.9776% (as per clause (b)) ---> 9.3936% in total

This is my view.

anil (na) (31 Points)
Replied 07 August 2012

I am Sorry I didnt get cleared. It still more confusing . Please explain in more point ot point basis with example. Practically.

Durga prasad N (Finance Officer) (57 Points)
Replied 16 August 2012

Applicability of notification no 30/2012 of service tax in case of renting of motor vehicle :

1) Check if service provider is a company then the same is not applicable if not point 2

2) Service provider provides the bill inclusive of service tax and want to take input credit then service tax is to be paid by SR 30000*40% *12.36% on taxable service and SP 30000*60%*12.36% on taxable service.

3) if Service provider doesn't want to avail cenvat credit then service provider has to pay 30000*40%*12.36%.

In view of the above, in both cases service receiver's responsibility of paying service tax is same and he will get the input benefit too.

Durga prasad N (Finance Officer) (57 Points)
Replied 17 August 2012

sorry friends, in my previous opinion, point no 3 by mistake it was given like "service provider" has to pay servie tax in the place of "service reciever" has to pay service tax.