Renting a cab

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HIMANSHU VARSHNEY (Querist)
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09 February 2016 Dear sir,
1.Is contract carriage is liable for service tax BY SERVICE RECIEVER ?
2. IS CONTRACT CARRIAGE COVERED UNDER THE DEFINATION OF METERED CAB, IF COVERED NOT LIABLE FOR SERVICE TAX UNDER NAGATIVE LIST? HOWEVER AS PER MEGA EXEMPTION LIST TRANSPORTATION FOR CHARTED HIRE LIABLE FOR SERVICE TAX?
3. A CONTRACT BETWEEN COMPANY WITH TRANSPORTER FOR TRAVELLING IS IT EITHER COVERED UNDER MEGA EXEMPTION LIST TRANSPORTATION FOR CHARTED HIRE LIABLE FOR SERVICE TAX OR UNDER DEFINATION OF METERED CAB AS PER FINANCE ACT 2014?

PLEASE SUGGEST

HIMANSHU VARSHNEY
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Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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13 February 2016 Services by way of giving on hire –
(a) to a State transport undertaking, a motor vehicle meant to carry more than twelve passengers; or (b) to a goods transport agency, a means of transportation of goods; are exempt from service tax.
Exemption shall be available subject to following two conditions –
(a) hiring to a State transport undertaking or to a goods transport agency
(b) hiring of motor vehicle to carry more than 12 passengers or in case of GTA, for transportation of goods.
In both the cases, vehicle should be given on hire.

Following type of transport of passengers shall be exempt from Service Tax –
Transport of passengers, with or without accompanied belongings, by –
(a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal;
(b) a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire; or
(c) ropeway, cable car or aerial tramway.

Contact carriage is defined in section 2(7) of the Motor Vehicles Act, 1988. Accordingly,
“Contract carriage means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorized by him in this behalf on a fixed or an agreed rate or sum —
(a) on a time basis, whether or not with reference to any route or distance; or
(b) from one point to another, and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes —
(i) a maxi cab; and
(ii) a motor cab notwithstanding that separate fares are charged for its passengers”.
However, with amendments to Finance Act, 1994, radio cabs & motor cabs with aggregators like Uber & Ola are liable to pay service tax. Since they are bodies corporate no reverse charge is applicable.

The ingredients of a contract carriage are as follows :—
It carries passengers for hire or reward;
It is engaged in contract whether expressed or implied for use of such vehicle as a whole;
The contract must be entered into by the person with the holder of permit in relation to such vehicle or with any person authorized by him;
The agreed consideration can either by on time basis or one point to another;
The vehicle should not stop to pick up or set down passengers not included in the contract anywhere during the journey;
In cases where a bus operates on a route under a contract carriage and passengers embark or disembark from the bus at any place falling on the route and pay separate fares for the whole or for stages of journey, no Service Tax would be payable. However, transport of passenger in a contract carriage for the transportation of passengers for tourism, conducted tour, charter or hire is taxable.

Therefore , if a contract carriage complies with the above regulations, it is an exempt service not subject to service tax. Accordingly it is also not subject to Reverse Charge Mechanism.

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