RENTING OF MOTOR VEHICLE is a service as defined u/s 65-B(44) and hence a charge of Service tax arises on it u/s 66-B.
Notification no 25/2015 of MEGA EXEMPTION ( Entry No. 22) Exemption on some renting services of motor vehicles. Following services are exempt from Service tax:
Service by way of giving on Hire to a 'State Transport Undertaking', a motor Vehicle meant to carry more than 12 passengers; and
to a ' Goods transport agency' a means of transportation of goods.
Talking about ABATEMENT, notification no. 26/2015, entry no. 9 specifies 60% abatement on value of service chargable to Service tax on renting of any motor cab designed to carry passengers. Hence Service tax is to be calculated on 40% of the value of service.
Motor Cab here means any motor Vehicle which is constructed to carry not more than 6 passengers ( excluding the driver).
In case when Service tax is calculated on abated value no input credit is allowed. However, credit of Sub-contracted service of renting of motor cab is eligible. If Sub contractor also availed abatement then full credit is allowed or if sub contractor has availed abatement then credit of 40% is allowed.
Sec 68(2) REVERSE CHARGE on renting of motor vehicle designed to carry passengers:
Partial Reverse charge is applicable when service provided or agreed to be provided by HUF or
Individual or
Partnership Firm ( whether registered or not)
Association of Person
to an Business entity registered as Body Corporate located in taxable territory.
Service by way of Renting of a motor vehicle designed to carry passengers to any person who is not engaged in similar line of business.
% payable by SP % Payable by SR
- ST being paid on abated Value NIL 100%
- ST being paid on Non -abated Value 50% 50%
CAclubindia
