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
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