26 November 2011
Dear All, If Company A gives his trucks to sister concern B for running them on hire. For that company B pays certain amount on monthly basis to A. My query:- 1) Company B deduct TDS u/s 94C @ 2% while making payment ? 2) Whether a has to charge service tax on bill ? (if yes is there any way to save Service tax by showing it in any other manner) 3)Which company can claim CENVAT credit & against which
26 November 2011
1 & 2 First of all u should check that whether the contract between Co A & B is amount to Financial Lease agreement u/s 65 (12) or Contract of supply of tangible goods for use without transferring right of possession and effective control of machinery, machinery and appliances u/s 65 (105)(zzzzj). From the above fact it appears that it will fall under section 65 (105) (zzzzj), if it is not so then it will be exempt if it will also not fall under financial lease. It also appears that B is using the same for goods transport purpose which I think A itself can do. According to me if A itself can do the same then there is no use to involve B because it will save B from the implication of applicability of Service Tax Act. 3. As per rule 2(l) of CENVAT credit rules, 2004, CENVAT credit may be taken in respect of input services used for providing output services. So u just check whether input service is used for providing output service if yes then u may take CENVAT credit. But in your give special attention in respect of following: List of Services Specified Under Rule 2 (l)(ii)(B) 1. General Insurance Business Services[65 (105) (d)] 2. Rent-a-Cab Scheme Operator Services [65(105)(o)] 3. Authorised Service Station Services [65(105)(zo)] 4. Supply of Tangible Goods Services [65(105)(zzzzj)] If the above services are used in respect of motor vehicle by any service provider then they shall not be included in the definition of input services and accordingly CENVAT credit shall not be taken. However, if the above services are used by the following service provider in respect of motor vehicle then they shall be included in the definition of input service and accordingly CENVAT credit shall be taken: 1. Courier AgencyServices [65 (105) (f)] 2. Tour OperatorServices [65(105)(n)] 3. Rent-a-Cab Scheme Operator Services [65(105)(o)] 4. Cargo Handling Agency Services [65(105)(zr)] 5. Goods Transport Agency Services [65(105)(zzp)] 6. Outdoor Caterer Services [65(105)(zzt)] 7. Panadal or Shamiana Contractor Services [65 (105) (zzw)]
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