Pradeep Jain - Chartered Accountant

Query

(Deepak Dalvi) Posted On: 11 Oct, 2014

Respected Sir, I am little confused in rent a cab service under RCM: if a. Service provider is individual but not registered in service tax. and service receiver is company and registered under ST. so my query is what is tax liability to pay service tax to service receiver & provider, under rent a cab service. whether avail the benifit of abatement or exemption. and who avail.please specify the notification no. b. Service Provider is Individual registered under service tax and service receiver is company and register under ST. so what is the tax liability to pay service tax to service receiver & provider. whether avail the benifit of abatement or exemption. and who avail. c. invoice structure from service provider - if Service Provider charge ST in bill then at what rate, in both the above conditions note: 1. we receive a bill from service provider who is registered with service tax & charge ST @ 4.944% in the invoice.whether is this correct. other condition is 2. we receive a bill from service provider who is not registered in Service Tax & not charging ST in his bill. then as a service receiver what is my ST liability is 40% or full 100%. Regards, Deepak

For rent a cab service, there is abatement notification which prescribes that only 40% of the taxable value is leviable to service tax provided no cenvat credit is taken. However, the provision of reverse charge mechanism is applicable if rent a cab service is provided by individual/HUF/partnership firm to business entity registered as body corporate. Further, in case the benefit of abatement notification is availed, the liability to pay service tax to the government is on service recipient under full reverse charge. However, if the benefit of notification is not availed by the service provider, then 50% liability is to be paid by service provider and 50% by the service recipient. Before budget 2014-15, it was 60% for service provider and 40% for service recipient. Reverse charge is applicable irrespective of the fact whether the service provider is registered or not if the required conditions are satisfied. If reverse charge is not applicable, then the service provider may charge at the rate of 4.944% if he claims abatement and does not take cenvat credit otherwise he may also charge at the rate of 12.36% if cenvat credit is availed by him. {Query replied by CA Neetu Sukhwani & Monika Tak}

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