Letting out of motor vehicles on hire

CA Ganesh Karthik (Chartered Accountant) (368 Points)

02 July 2012  

Dear Members,

 

As per the new regime of service tax, in case of letting out of motor vehicles on hire by an individual or a firm to a company, reverse charge mechanism would be applicable.

 

In this regard, if an employee of a company hires a cab, and later on seeks the reimbursement from the company, is the company liable to pay tax under reverse charge mechanism, or this transaction would be treated as a separate transaction between employee and employer and thereby not subject to service tax?

 

Two scenarios may be possible:

  1. Bill obtained by the employee in his own name
  2. Bill obtained in the name of the company

 

I'm more concerned about the second scenario. Pls share your views in this regard. Hope you got my question.