Hiring of Motor Vehicles, Service Tax

[RAM SHARMA]

Dear Experts,

As per service tax notification no. 30/2012 dt. 20/06/2012 Hiring of motor vehicles to carry passenger on abated value and non abated value under reverse charge machenism.

What is the meaning of abated value and non abated value for calculation of service tax. Secondly we have hiring bus for our workers on some collection of Employees contribution and some payment made by company. In this case, is company is liable for service tax under reverse charge.

Thanks 

Posts / Replies

[R MUTHURAJ]

Dear Mr.Ram Sharma,

(1) Let me explain the meaning of Abated Value and Non Abated Value.

In the case Services of Transport of passenger have abatement of 60% Balance 40% only taxable.

In the case Services of Transport of passenger have non - abatement then entire 100% will be taxable.                                                                   

Then what is the difference between these two?

If the Service Provider wants to put Tax only for the balance 40%, then he CAN NOT TAKE CENVAT INPUT CREDIT  as per the  Cenvat Credit Rule, 2004

But if the Service Provider pays  Tax on100%, then he CAN  TAKE CENVAT INPUT CREDIT  as per the  Cenvat Credit Rule, 2004

(2) In respect of your second question, if the Transporter takes input credit (prefers for non-abatement) then he has to levy service tax on 60% Value and the Service receiver (the company) has to pay Service Tax on 40% Value.  

In case, if the Transporter DOES NOT takes input credit (prefers for abatement) then he will not charge service tax in his bill and the Service receiver (the company) has to pay Service Tax on 100% Value with 40%.

In both the cases, the government will get the same amount of service tax. 

I Trust this clarifies your doubts.

[RAM SHARMA]

Sl.No.

Description of a service

Percentage of  service tax payable by the person providing service

Percentage of service tax payable by the person receiving the service

7

(a)   in respect of  services  provided or agreed to be provided  by way of renting of a  motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business   (b)   in respect of  services  provided or agreed to be provided  by way of renting of a  motor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business

Nil             60%

100 %             40%

I would like to conclude as in Sr no. 7(a) carry passengers on abated value means(if service provider avail cenvat credit benefit) and in Sr. no. 7(b) carry passenger on non abated value means(if service provider not availed cenvat credit benefit)

Secondly we have collected contribution from our employees for bus fare however we will be liable for service tax. Please advice.

Thanks