/ Indirect Tax

HIRING OF MOTOR VEHICLES – SERVICE TAX

HIRING OF MOTOR VEHICLES – SERVICE TAX

  • Renting of any motor vehicle – 40% taxable
  • Abatement of 60%.
  • This is subject to the condition that input, input services  and capital goods , used for providing the taxable services has not been taken under the provision of CENVAT Credit Rules.

In the case Services of Transport of passenger have abatement of 60% Balance then 40% will be taxable.
In the case Services of Transport of passenger have non – abatement then entire 100% will be taxable.

What is the difference between these two?

  • If the Service Provider wants to put Tax only for the balance 40%, then he CAN NOT TAKE CENVAT INPUT CREDIT  as per the  Cenvat Credit Rule, 2004
  • But if the Service Provider pays Tax on 100%, then he CAN  TAKE CENVAT INPUT CREDIT  as per the  Cenvat Credit Rule, 2004

If the Transporter takes input credit (prefers for non-abatement) then he has to levy service tax on 60% Value and the Service receiver (the company) has to pay Service Tax on 40% Value.

In case, if the Transporter DOES NOT takes input credit (prefers for abatement) then he will not charge service tax in his bill and the Service receiver (the company) has to pay Service Tax on 100% Value with 40%.

In both the cases, the government will get the same amount of service tax.

Liability to pay service tax

Hiring of motor vehicle designed to carry passenger Service recipient Service provider
a] with abatement    100% nil
b] without abatement    40% 60%

Changes in Partial Reverse Charge Mechanism Vide Notification No. 10/2014-ST Dated 11-7-2014:-

In case of Renting of motor vehicle where the service provider does not take abatement, the portion of Service tax payable by the service provider and service receiver has been modified as 50% each effective from October 1, 2014

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiindia.com or call at 011-233   433 33.

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