METERED CAB – SCOPE AND TAXATION

[Dr. Sanjiv Agarwal]

According to section 65B (32) of the Finance Act, 1994, as amended, 'metered cab' was defined as under:

'metered cab' means any contract carriage on which an automatic device, of the type and make approved under the relevant rules by the State Transport Authority, is fitted which indicates reading of the fare chargeable at any moment and that is charged accordingly under the conditions of its permit issued under the Motor Vehicles Act, 1988 and the rules made thereunder.

Finance Act, 2014 has added the words, ‘but does not include radio taxi’ after the definition so as to exclude radio taxi from the scope of metered cab (w.e.f. 1-10-2014).

‘Metered cab’ is a new definition which is not found in Motor Vehicle Act, 1988.

Metered cab should be a contract carriage fitted with automatic device duly approved by Transport Authority for reading of fare chargeable as per permit issued under Motor Vehicle Act, 1988. Essentially, it should be a contract carriage and fitted with meter to capture reading of distance and fare to be charged to passenger.

According to Section 2(7) of the Motor Vehicles Act, 1988, contract carriage is defined as under–

“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 authorized 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 -

(i) a maxicab; and

(ii) a motor cab notwithstanding that separate fares are charged for its passengers”.

The ingredients of a contract carriage are as follows : -

- It carries passengers for hire or reward;

- It is engaged in contract whether expressed or implied for use of such vehicle as a whole;

- The contract must be entered into by the person with the holder of permit in relation to such vehicle or with any person authorized by him;

- The agreed consideration can either by on time basis or one point to another;

- The vehicle should not stop to pick up or set down passengers not included in the contract anywhere during the journey;

- It includes maxi-cab or motor-cab.

According to Section 2(31) of the Motor Vehicles Act, 1988, permit is defined as under –

“permit means a permit issued by a State or Regional Transport authority or an authority prescribed in this behalf under this Act authorizing the use of a motor vehicle as a transport vehicle.”

Amendment made by Finance Act, 2014 (w.e.f. 1-10-2014)

The definition of ‘metered cab’ has been amended by Finance (No.2) Act, 2014 and after the words, ‘the rules made hereunder’, the words ‘but does not include Radio taxi’ shall be inserted. Presently, transport of passengers by metered cabs, radio taxis or auto-rickshaws is covered under negative list. Now, Finance Act, 2014 has introduced service tax on radio taxis also (w.e.f. 1-10-2014).

Radio Taxi

‘Radio taxi’ was not defined in the Finance Act, 1994 so far. In absence of any definition under the Finance Act, 1994, the expression ‘radio taxi’ carries its natural meaning and would, therefore mean a call-taxi. As per states transport authorities, radio taxi permit is given only if:

• Cabs are purchased and not hired by the operator.

• GPS/GPRS system is installed in the cabs and is monitored by the controller.

Therefore, radio taxi meant: -

• a taxi approved by the State transport authorities, which satisfies all the above conditions, or

• any taxi in which the dispatcher of the taxi has to be contacted for availing of the taxi facility.

However Finance Act, 2014 has defined the term ‘radio taxi’ in clause 2(za) of Notification No. 25/2012-ST as amended.

Radio taxi is defined in para 2(za) of exemption Notification No. 25/2012-ST, dated 20.6.2012, as amended and accordingly radio taxi means

‘Radio taxi’ means a taxi including a radio cab, by whatever name called, which is in two way radio communication with a central control office and is enabled for tracking using Global positioning System (GPS) or General Packet Radio Service (GPRS).

Thus, for a radio taxi, following points are important to note:

• It should be a taxi

• It includes a radio cab or called by any other name

• It operates through two way radio communication with central control

• It uses Global Positioning System (GPS) or General Packet Radio Service (GPRS) for operational purposes and tracking

Taxi means a taxi cab or taxi car.

Necessary change has also been made in negative list under section 66D(o)(vi) wherein radio taxis has been specifically excluded.

Negative List

Under negative list [clause(o) of section 66D] service transportation of passengers, with or without accompanied belongings by metered cabs (excluding radio taxis w.e.f. 01.10.2014 or auto rickshaws is in negative list.

Amendments made by Finance Act, 2014 (w.e.f. 1-10-2014)

The clause (o) (vi) has been substituted by Finance Act, 2014 with effect from 1-10-2014 and the word ‘radio taxi’ has been excluded from the net of negative list. Now cabs and auto rickshaws shall be in negative list.

Service Tax has been levied on services provided by radio taxis or radio cabs, whether or not air-conditioned. The abatement presently available to rent-a-cab service would also be made available to radio taxi service. Consequent changes to Notification No. 30/2012-ST dated 20.06.2012 under reverse charge mechanism have been made vide Notification No. 10/2014-ST dated 11.07.2014 –

(a) As per amended Notification, where a radio taxi service provider claims the benefit of abatement, in such a case the service recipient (being a registered body corporate) would continue to discharge 100% of the service tax liability under the reverse charge mechanism.

(b) However, where the service provider has not claimed any abatement, the service recipient (being a registered body corporate) would be required to discharge 50% of Service Tax liability under reverse charge.

Consequent change has also been made in Notification No. 26/2012-ST dated 20.06.2012 whereby the taxable value for radio taxi services has been specified at 40% subject to specified conditions. For details, refer to Topic No. 50 of the Book.

Thus, a view may be taken that only the taxi which would be covered within the above definition would be excluded from the negative list. Other radio taxis or cabs not fulfilling the requirements of the above definition may be construed as still covered within metered taxi and, therefore, covered by negative list.

Exemption

Exemption under Notification No. 25/2012-ST dated 20-6-2012 is available to transport of passengers, with or without accompanied belongings, by:–

(a) air, embarking or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Baghdogra located in West Bengal; or

(b) a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire;