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Service tax on hiring taxi

shailesh (Service) (227 Points)

20 November 2015

Ours is a Govt department and hiring taxies (vehicles) on contract for our official use.

1.what will be service tax rate we have (Service Receiver)to pay on hiring bill?

2.what will be the service tax rate the agency (i.e. Service provider) will pay on hiring bill?

Present Rate is 14.5% and our monthly taxi hiring charges bill is Rs.100,000/-(e.g.)

Since I am not commerce person I cant understand the "abatement issue" and "cenvat issue" in the service tax matter, hence please

provide information in simple langauge and with some example.

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2 Replies

CA Aditya Shah (Chartered Accountant Entrepreneur Ex Ernst & Young) (1908 Points)
Replied 22 November 2015

In case of Contract Carriages(other than motor cab) for transportation of passengers, Non AC contract carriages are exempt from service tax and taxable only in case of tourism.

AC Contract Carriages are taxable with 60% abatement but Cenvat Credit shall be disallowed.
There is no reverse charge in case of Contract Carriage. Service Provider to pay service tax.

In case you are hiring a motor cab (vehicle for transportation of not more than six passengers), you shall have to pay service tax under reverse charge mechanism if all are satisfied:

(1) Service provider is a HUF, Individual, Firm or AOP loacted in taxable territory
(2) You are a company or body corporate not engaged in similar busniess

If the Service Provider is claiming abatement, then the service is under full reverse charge, i.e 100% of Service Tax to be paid by you, else it is under partial reverse charge and you have to pay 50 of the amount.

Contact me if you need further suggestions or explanations.

Regards,

Gagan Deep Singh (CHARTERED ACCOUNTANT) (1190 Points)
Replied 22 November 2015

Dear Shailesh,

In your case you are availing the services of hiring of taxi as as service reciever for official use. Then service provider will charge service tax 40% of taxable value.(i.e. after 60% abatement). He will charge 14.5% service tax on Rs 40,000

You can avail cenvat credit of service tax amount paid to service provider.