Input credit on payment for vehicle hiring charges

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 October 2016 My company is in Security Agency Industry. Problem we are facing is some of our clients demands that they do not have any vehicle for Guards Rotation suppose in any Port. Now the company is hiring vehicle from Vehicle Vendors and give it to clients on No Profit No Loss basis.

Now we bill out client as below.
Charges For Security Service 100
Charges For Vehicle Hiring 40
Total 140

We collect tax on 140 and pay to Government

But For this vehicle vendor Payment on 40 we have to pay service tax as per Reverse Charge Mechanism.
So we pay tax on 40

Now can we claim tax on 40 is Input Credit or not???? If my company memorandum permits and Rent A cab service is included in ST2??? Though Rent A Cab Registration is as Service Receiver only.

Please Revert. Thanks in Advance. Also give reference of specific Section and Notification.

CA Ashish Garg

CA Ashish Garg (Expert)
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05 October 2016 Yes you cannot avail CENVAT Credit of such renting of motor vehicle.

Since, you are also engaged in renting of motor vehicle, you are not liable to pay service tax under Reverse Charge in terms of Notification No. 30/2012-ST dated 20.06.2012 as amended.

Querist : Anonymous

Querist : Anonymous (Querist)

16 October 2016 No sir actually main business is of security guards. only in some cases like port etc , we provide motor vehicles which we have taken on hire. Registration as Rent a Cab operator is for paying Reverse mechanism service tax only

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CA Ashish Garg

CA Ashish Garg (Expert)
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16 October 2016 Post 2012, service tax has become activity based tax. So if you are undertaking any activity with or without profit motive shall attract service tax. In your case, you have provided hiring of vehicle services to your client and hence you are squarely classifiable under Rent a cab operator service. It is no relevance that whether you are doing this hiring activity for just one client or for many clients. The nature of hiring of vehicle remains that of rent a cab service.

However i would like to rectify my earlier reply as since you are discharging service tax liability at full rate even on hiring charges, you are entitle to avail CENVAT Credit of Renting of motor vehicle services.

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