Service tax rcm query

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 August 2014 A private Ltd Company has taken a contract with Private bus to drop its employess from the company to Railway station and vise a versa.This company pays certain amount say 50000 per month against bill raised by that private bus travels.PRIVATE LTD company also deduct TDS and makes the payment to bus travels. This private bus travel is not registered under service tax(i.e. turnover of this travel is below 10 lacs)
In this example,is service tax applicable under RCM? and need to be paid by the Private Ltd company to the Govt?

Annu Agarwal

Annu Agarwal (Expert)
Follow

16 August 2014 As per the details provided by you it is not clear whether the private bus travels is a individual,HUF or a partnership firm.If it is any one of the above category then your company need to pay service tax under RCM to the government.

Querist : Anonymous

Querist : Anonymous (Querist)

18 August 2014 But as per Mega exemption Notification No.25/2012-ST,dt 20-6-2012
23 (b) Transport of passengers, with or without accompanied belongings, by-
A contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire are exempt as per notification No.25/2012.

So will the company be not covered under the above exemption.? Kindly clarify

Also RCM clearly states that Renting of Motor Vehicle is a taxable Service. As we do not have any rent agreement with the bus provider how we will be covered under RCM?

Upgrade to CAclubindia Pro. Subscribe Now!

Annu Agarwal

Annu Agarwal (Expert)
Follow

19 August 2014 As per my view:
First let us read what the notification No.25/2012 says:
(23b) Exemption to transportation of passengers by a contract carriage for the transportation of passengers, excluding tourism, conducted tour, CHARTER OR HIRE.

My Analysis:Though as per your understanding your company has entered into a contract for transportation of employees and not hired the contract carriage.As per my analysis a Contract carriage used for transporting employees is a CHARTER CARRIAGE as it is contracted specifically for a particcular number of employees.So the exemption wont be available.

Second Point I put forth is Definition of Contract Carriage:“Contract carriage” has the meaning assigned to clause (7) of Section 2 of the Motor Vehicles Act which reads as follows:
“7) “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 authorised 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 –

My Analysis:Practically it is not possible that the only the employees name mentioned in the contract travel in the Contract Carriage.Many times some employees whose name are not mentioned in the contract may also travel in the Contract Carriage.Thus the condition for exemption may not be satisfied in such cases and threfore service tax shal be charged.

Disclaimer:These are my views based on my interpretation .These may differ from others.Other experts may also share their views as well.