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Rcm

salman ibrahim (student) (49 Points)

18 January 2016

I have query about the applicability of RCM in hire of a cab. The status of servicce provider is unknown. He charges me a hire amount of Rs 1000 in his bill without charging service tax. We being a corporate entity have a doubt that should i pay the whole amount as RCM or 40 % of it. Any explanation with clarity will be helpful.

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Arpit verma (Indirect tax) (1372 Points)
Replied 18 January 2016

Renting of Motor vehicles

Services of renting of motor vehicles designed to carry passengers.
Services should not be to any person in similar line of business.
Service provider may be an individual, HUF, partnership firm or AOP.
Service receiver should be a business entity registered as body corporate.
Service provider and service receiver should be located in taxable territory.
Not applicable when service provider is a body corporate

In case of non abated value

Liability of service receiver is 50% of the amount of service tax .
Service provider is liable to pay 50% of the amount of service tax.

In case of abated value

100% liability of service receiver.
it is advisable that pay ST on reverse charge on 100% value by considering abatement under N.no.26/2012-ST.

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salman ibrahim (student) (49 Points)
Replied 18 January 2016

My question is that the service tax is not mentioned in the invoice. How about that?

Arpit verma (Indirect tax) (1372 Points)
Replied 18 January 2016

Comply you own responsibility for payment of service tax under RCM.

it is not a matter whether provider is charging ST

salman ibrahim (student) (49 Points)
Replied 18 January 2016

then i have to pay whole amount of ST i.e., 14.5%?

Arpit verma (Indirect tax) (1372 Points)
Replied 18 January 2016

yes, but after abatement.

Service tax paid on reverse charge also eligible for cenvat credit on the strength of challan.
Service tax payable on reverse charge cannot be paid through cenvat credit a/c.

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Ashish Chaudhary (CA Practice ) (2209 Points)
Replied 20 January 2016

1. If service provider is not registered, it could be presumed that he has claimed abatement (as he cannot avail the credit)- Pay service tax on 40% under RCM. (14.5%*40%)

2. If SP is registered with department and still not charging ST (may be less than 10 lacs), it could be considered that he has availed abatement and liability same as above under point 1.

3. If SP is registered with department and not charging service tax beyond 10 lacs, it is because he has claimed abatement and service tax under RCM as per option under 1.

In all above scenarios, suggested to take undertaking from SP that he has claimmed abatement and not taking credit on input, input service and capital goods.

4. Where SP has not claimed abatement, he would charge service tax on 50% value (i.e. 14.5%*50%). Balance tax needs to be paid under RCM (14.5%*50%)

@ Arpit- credit of service tax paid under rent a cab service not eligible as specifically excluded from the defintion of input service.

salman ibrahim (student) (49 Points)
Replied 20 January 2016

Thanks a lot sir. This was the reply i was looking for.

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 20 January 2016

Indirect way of identifying his status. If you have his PAN no., then check whether 4th digit of his PAN no. is C. If yes, then RCM would not apply. If no, then RCM would apply after applying abatement, so effective service tax rate would be 5.6% as service tax and 0.2% as Swachh Bharat Cess.