Reverse charge of service tax on cab service provider.

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Uday G

Business

106 Points Posted on 07 December 2012

A private limited company is engaged in the business of providing cab service. The company is availing the abetment benefit and paying the service tax on 40% of the value of the service provided. The company is also not availing any input CENVAT credit.

When the requirements for the cabs are more and company’s cabs are not sufficient to provide the service, the company will call individual cab owners to provide the service. These individual cab owners will get the payment from the company.

Whether the reverse charge of service tax is applicable for the amount paid for the individual for the cab services?

Replies (4)

Mallikharjun

Deputy Manager

354 Points Posted on 07 December 2012

The company has to pay service tax under reverse charge mechanism.

Prateek Agarwal

Sr. Executive - Finance & Accounts

1846 Points Posted on 08 December 2012

Yes...the individual cab owners service tax liability is to be paid off by your company.

Uday G

Business

106 Points Posted on 08 December 2012

but if we see the notification 30/2012. it says.:

(a) 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 to any person who is not engaged in the similar line of business

when the company is providing the same service , is that required to pay under reverse charge.?

Priyanka Maheshwari

Assistant Manager

76 Points Posted on 08 December 2012

In my understanding , RCM shall not apply otherwise it shall amount to double taxation. For eg your company is renting a car from an individual cab owner at rs. 1000 and providing the same to your customer at rs. 1500(say). You shall charge service tax to your customer at a base value of Rs. 1500(minus abatement) which included Rs. 1000 as well.

Therefore, if you were to pay under RCM also, ultimately you will end up paying service tax on Rs. 1000 twice which cannot be the intention of the legislation.