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ANYONE OUT THERE Pls help its urgent !!!!!

Varun (aaaaaaaaaaaaaa) (104 Points)

04 December 2008

i have a query, cn sum1 pls sort it out.

I have explained it with an example.

Example:

Company 'A' purchased car from leasing company 'B' on financial lease basis.

Here, B (i.e. Lessor) is a service provider and shall charge service tax from A (i.e. Lessee) u/h banking and financial service.

Now company C (which is engaged in the business of providing drivers) provides drivers to B for a commission.

Salary to drivers is paid by B.

Now B provides these drivers to A who reimburses the driver's salary to B.

My question is : Whether the driver's salary (paid by A to B) is chargeable to service tax?

Pls sum1 repy it would be of great help.

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5 Replies

kgbaliga (Mentor & Social Activist ) (43 Points)
Replied 05 December 2008

This is a business service ( providing drivers) it is subject to service tax levy. In any case the user of service to whom you bill , will be able to get a set off on this levy paid. It is always better to charge service tax whenever you raise a service bill. Err on the right side / safer side of the law. particularly when it somes to dealing with Tax matters. Tax man always itching to slap a demand and . So it is better to avoid getting such future demand of tax penalty and interest besides expenses on an avoidable tax litigation. Thanks to complexities of our tax laws in India, despite our best efforts some times we get entangled in tax litigation on account of thoughtless, overzealous and some times corrupt tax man ! Goodluck to you. Hope this helps

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Sumit Jain (CA) (4760 Points)
Replied 09 April 2009

Originally posted by :kgbaliga
"	This is a business service ( providing drivers) it is subject to service tax levy. In any case the user of service to whom you bill , will be able to get a set off on this levy paid. It is always better to charge service tax whenever you raise a service bill. Err on the right side / safer side of the law. particularly when it somes to dealing with Tax matters. Tax man always itching to slap a demand and . So it is better to avoid getting such future demand of tax penalty and interest besides expenses on an avoidable tax litigation. Thanks to complexities of our tax laws in India, despite our best efforts some times we get entangled in tax litigation on account of thoughtless, overzealous and some times corrupt tax man ! Goodluck to you. Hope this helps	"

agree

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 14 April 2009

Well Kgbaliga, I differ.

The service will fall under manpower supply service, service tax is payable by C, who is supplying manpower. The company B is merely getting reimbursement, on which no tax is payable.

Varun Pandya (Practice) (69 Points)
Replied 17 April 2009

Originally posted by :Varun
"	i have a query, cn sum1 pls sort it out. I have explained it with an example. Example: Company 'A' purchased car from leasing company 'B' on financial lease basis. Here, B (i.e. Lessor) is a service provider and shall charge service tax from A (i.e. Lessee) u/h banking and financial service. Now company C (which is engaged in the business of providing drivers) provides drivers to B for a commission. Salary to drivers is paid by B. Now B provides these drivers to A who reimburses the driver's salary to B. My question is : Whether the driver's salary (paid by A to B) is chargeable to service tax? Pls sum1 repy it would be of great help.	"

(i.) A would not be liable to pay service tax on drivers salary if it is reimbursed separately to B

(ii.) If drivers salary reimbursement is included in bill by B, service tax ought to have been collected on salary also

(iii.) Irrespective of (i) & (ii) C will charge service tax from B on account of providing Manpower Supply service

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 20 April 2009

If the reimbursement route is to be taken it maybe ensured that the conditions set out in Rule 5 92) of the ST Determination of Value Rules 2006 are met. This area is expected to be a dispute prone area in time to come.