Reverse charge mechanism on renting or hiring of cabs

Queries 9060 views 3 replies

CMA Ashutosh Kumar Gupta

Unit Financial Controller

1015 Points Joined August 2010

Ref. new notification numbers 15 and 30 of 2012, following change in case of renting or hiring of cabs to carry pessengers as regards reverse charge mechanism ratio:

Descripttion of a service

Percentage of service tax payable by the person providing service

Percentage of service tax payable by the person receiving the service

(a) in respect of services provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger on abated value.

(b) in respect of services provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger on non abated value.

Nil

60%

100 %

40%

Comments and Query: (a) It appears that in case of abated invoicing by the SP i.e. charging of Service Tax @ 12.36% on 40% assessable value of service, the liability to make the payment to the Deptt. has been shifted 100% on SR (service receiver)..IS IT CORRECT TO CONCLUDE?

(b) in case of invoicing by the SP without availing abatement benefit, HOW the BILL FROM SP would appear (i.) whether with Service Tax on 60% value and liability remains with SP (Service Provider) to pay the same to the Deptt., and Service Tax on remaining 40% Value (of AV) will be added and paid to the Deptt. by SR (Service Receiver), OR (ii) No service tax is billed by the SP but SR will be accounted for providing Service Tax on 40% of AV i.e. @ 12.36% on 40% value and accordingly is liable to pay the same to the Deptt. THEN How the Service Tax provision for remaining part of 60% charging and payability (to the Deptt.) on the part of SP will be addressed HENCE IT APPEARS A NECESSITY THAT SP MUST CHARGE SERVICE TAX ON 60% VALUE i.e. of Assessable Value of Service, deposit the same with the Deptt.; CONSEQUENTLY ultimate 100% is borne by the SR, the non-abated value (60% of SP+40% of SR)....IS IT CORRECT TO CONCLUDE..??, (iii) What would happen if SR provisions Service Tax on 40% value and Deposit the same with the Deptt. but SP being exempted under Small Scale Service Provider (below the threshhold limit of Rs.10L of TO and Not Registered with the Deptt.) THEn what would happen as regards ST on 60% value to be paid by the SP????

Replies (3)

RENGARAJ R.K

ADVOCATE

7557 Points Joined October 2010

From the initial discussion it is understood that,

When Service provider is RC holder

1) For abatement availed value, no responsibility for Service provider and Service Receiver will pay 100%

2) For non-abated value, the Service provider will pay 40% and SR will pay 60%. In both the cases SR is eligible to take input tax ie. whatever he paid the same challan is the cenvat document to avail the credit.

When service provider is in the threshold limit

If you engage a taxi from the non rc holder the total liability is shifted to SR, under reverse charge mechanism. Even for Rs.3000/- for e.g.

Let us wait to see further clarification from the dept.

CMA Ashutosh Kumar Gupta

Unit Financial Controller

1015 Points Joined August 2010

(1) I think 'abated value' should be determined here in the instant case and under reverse charge mechanism EXCLUSIVELY from the point of view SERVICE RECEIVER (NOT the Service Provider) where SP raises the bill WITHOUT SERVICE TAX

(2) in case 'non-abated value' should be similarly determined EXCLUSIVELY from the point of view SERVICE PROVIDER where SP raises the bill WITH ST on 60% of AV.

(3) in case of NON-REGISTERED SP OR EXEMPTED UNDER SMALL SCALE, Service Receiver (SR) MUST PROVISION AND PAY ST on FULL BILL VALUE i.e. 100%, because being unregistered/exempted SP can't charge any service tax as well as can't be held liable to pay any % at all.