Service tax matter
This query is : Resolved
22 October 2013
gud evening to all expert,
we hired a bus contractor for carried our staff. then sir we are regularaly deposit 40% service tax behalf of him. but sir bus contractor did not deposit 60 % service tax. i want to know only that can it is possible that bus contractor does no deposit 60% service tax only we deposit service tax @40%.. it depands on bus contractor registration in MOTOR VECHILE ACT.
THANKS IN ADVANCE
we hired a bus contractor for carried our staff. then sir we are regularaly deposit 40% service tax behalf of him. but sir bus contractor did not deposit 60 % service tax. i want to know only that can it is possible that bus contractor does no deposit 60% service tax only we deposit service tax @40%.. it depands on bus contractor registration in MOTOR VECHILE ACT.
THANKS IN ADVANCE
23 October 2013
Irrespective of the status registered by the contractor under Motor Vehicles Act, Service Tax is levied "in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers" under the category Rent-a-Cab Service.
Rent-a-Cab Service offers two options the service provider:
(1) Avail of 60% abatement and pay service tax on 40% of the invoice. If abatement is availed no CENVAT Input Credit can be availed of with regard in input services.
(2) Avail no abatement, enjoy CeNVAT credit on Input services and pay tax on 100% of the invoice.
Sub-section (2) of section 68 of the Finance Act, 1994, empowers the Government to transfer the responsibility of the service provider to collect pay the service tax onto the service recipient. This is the Reverse Charge Mechanism.
Notification No 30/2012 dated 20th June 2012 extends the provisions of Section 68(2)to cover ten services including Rent-a-Cab Service. Under Reverse Charge Mechanism the concept of threshold exemption is not applicable.
Item 7 of Para II of the Notification lays down, that in case the service provider of Rent-a-Cab avails of the abatement of 60%, the entire service tax (on the balance 40%) will have to be paid in cash by the service recipient. In case the service provider does not opt for abatement 40% of the Service Tax will have to be paid by the service recipient and 60% by the service provider.
Whether a contractor is availing of the abatement of 60% or not will be apparent from the contractor's invoice. Normally a contractor who has availed of the abatement will not charge ST in his invoice. Where no abatement is availed the invoice will show the service recipient's share of ST and the service providers share of ST.
Therefore most probably your contractor has availed the abatement of 60% ST and hence he is not making any payment to the credit of the Central Government.
Rent-a-Cab Service offers two options the service provider:
(1) Avail of 60% abatement and pay service tax on 40% of the invoice. If abatement is availed no CENVAT Input Credit can be availed of with regard in input services.
(2) Avail no abatement, enjoy CeNVAT credit on Input services and pay tax on 100% of the invoice.
Sub-section (2) of section 68 of the Finance Act, 1994, empowers the Government to transfer the responsibility of the service provider to collect pay the service tax onto the service recipient. This is the Reverse Charge Mechanism.
Notification No 30/2012 dated 20th June 2012 extends the provisions of Section 68(2)to cover ten services including Rent-a-Cab Service. Under Reverse Charge Mechanism the concept of threshold exemption is not applicable.
Item 7 of Para II of the Notification lays down, that in case the service provider of Rent-a-Cab avails of the abatement of 60%, the entire service tax (on the balance 40%) will have to be paid in cash by the service recipient. In case the service provider does not opt for abatement 40% of the Service Tax will have to be paid by the service recipient and 60% by the service provider.
Whether a contractor is availing of the abatement of 60% or not will be apparent from the contractor's invoice. Normally a contractor who has availed of the abatement will not charge ST in his invoice. Where no abatement is availed the invoice will show the service recipient's share of ST and the service providers share of ST.
Therefore most probably your contractor has availed the abatement of 60% ST and hence he is not making any payment to the credit of the Central Government.
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23 October 2013
but sir he( bus contractor) is not registered under motor vehile act then what happen.
23 October 2013
If a vehicle is not registered under Motor Vehicles Act - and it is the vehicle that is registered and not the person - that vehicle is plying illegally. This will impact a number of activities like penalty for traffic violation, settlement of Insurance claims in case of accidents, recovery of the vehicle in case of theft, etc.
Service Tax is not levied on the asset used for rendering service but on the service rendered by the person owning the asset. This is a fine legal distinction, by which even if services are rendered with illegal assets and the service tax thereon is payable and paid, no penalty will accrue under the statute levying the tax, but the person opens himself up for prosecution under penal provisions of other statutes in force.
I am sure that the service provider issues service invoices to your organization based on which you compute and pay the service tax. I also presume that payments to the contractor are made by account payee cheque with proper TDS (income tax). Therefore, whether the service provider has registered his vehicle under Motor Vehicles Act or not, you as a service recipient of Rent-a-Cab service discharging your liability under reverse charge, are perfectly safe. Further no input credit can be availed of for payment of ST on Rent-a-Cab service, so the status of the service provider is immaterial.
Service Tax is not levied on the asset used for rendering service but on the service rendered by the person owning the asset. This is a fine legal distinction, by which even if services are rendered with illegal assets and the service tax thereon is payable and paid, no penalty will accrue under the statute levying the tax, but the person opens himself up for prosecution under penal provisions of other statutes in force.
I am sure that the service provider issues service invoices to your organization based on which you compute and pay the service tax. I also presume that payments to the contractor are made by account payee cheque with proper TDS (income tax). Therefore, whether the service provider has registered his vehicle under Motor Vehicles Act or not, you as a service recipient of Rent-a-Cab service discharging your liability under reverse charge, are perfectly safe. Further no input credit can be availed of for payment of ST on Rent-a-Cab service, so the status of the service provider is immaterial.
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23 October 2013
only 1 question sir it means if service provider will take registrationn in motor vehicle act to carry passenger on abated value thenn in this case we will paid 100 % service tax or only 40% part of service receiver as per notification no. 30
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