Service tax query urgent

We are the tour & travel agent. we used to take car on hire from other tours operators.

What will be the liability of Service tax to be paid by us if the tour operator providing only car on rent to us,

if they are registered under service tax or in case not registered under service tax.

rate will be 12.36% for service receipent or 4.944% in both the cases if the service receiver is registered under service tax or not. 

Dear Arun Gupta,

I am unabke to understand your query. Request you to rephrase the query and re-post it. 

Nevertheless, from what I could understand from your query, the following points may be relevant to note:

1) in case the tour operators providing cars on rent to you (the "supplier") transfers the effective control and possession to you, giving you the right to use the car as per your discretion, such transaction is a transaction of "deemed sale" as per Article 369(29A) of the Constitution of India, attracting VAT and not Service tax.

2) However, in case the supplier provides the car to you without transferring the actual control and possession of such car, such a transaction would be a service and would consequently attract service tax at the applicable rate of 12.36%.

Note: The test of transfering the effective control and possession can be illustrated by way of the following examples.  Please note that the following examples are merely illustrative and are not exhaustive.

*)  The Supplier gives you the car on rent along with a driver (who is employed by the Supplier)- In such a scenario the actual control and possession is retained by the Supplier with a direction to such driver to transport you or your passengers as per your direction.  This transaction is that of a service and attracts service tax.

*)  The supplier gives you the car on rent for a certain period, for your use as per your discretion-  In such a scenario, the effective position and control of the car is transferred to you since you will be driving and using the car on your own.  This is a deemed sale attracting the levy of the state VAT.

Saransh S

HM Giriya & Co, Chartered Accountants (Bangalore)

e-mail:  saransh.giriya @ gmail.com

Correct. The query should be very clear. The reply is perfectly correct.This need to be addressed.

(Jayam Ramesh K C)

Dear Mr. Arun Gupta,

Mr. Saransh has correctly explained the tax implication between you and the supplier of car. 

Now for the services provided by you to your clients, the tax liability is as below:

If you are an individual, proprietorship firm or partnership firm (including LLP) and your client, service receiver is a body corporate, then the service tax need to be paid as under reverse charge mechanism vide not. no. 33/2012. (depending on abated value or unabated value)

In other cases,  you should pay the tax @ 12.36% after claiming abatement vide not. no. 26/2012.

tax2001-it @ yahoo.com