Hi All,
I have a tricky question. I am a travel agent & arrange for accomodation, air tickets, tour packages & car rentals. My question is specific to car rental.
I do not own any car & utilize services of local car rental agencies for my clients - I markup the rates from local service providers while providing rates to my customers. Example - I have a negotiated rate of Rs 1,000 with a local car rental provider while I sell the same to the customer @ Rs 1,200. In this case, Rs 200 is my gross profit. I would like to understand the implication of service tax for the following scenarios
1. I collect the entire amount from the customer directly: In this case, I charge a service tax of 4.94% to the customer. Considering the above example, I am raising invoice to customer & would charge the customer Rs 1,200+Rs 59.28 = Rs 1,259.28 to the customer. Is this correct? I would then make a payment of Rs 1,000 to the local car rental vendor & Rs 59.28 as service tax.
2. The vendor collects the entire amount from the customer directly: In this case, in order to save my time for accounting, I am asking the vendor to direclty issue the invoice. He would issue invoice & charge Rs 1,259.28 to the customer. He would then pay me Rs 200.
3. I collect an advance of Rs 500 from the customer: Here the customer pays the remaining amount (Rs 759.28) directly to the local car rental vendor after using services. I raise a bill of Rs 1,259.28 to the customer. I pay Rs 240.72 (Rs 500- Rs 200(my commision) - Rs 59.28 (service tax)) to the vendor & pay Rs 59.28 as service Tax.
Am I doing things correctly? Is there something else that I should be taking care of?
Thank you
CAclubindia
