Rent-a-car, Service Tax

[ganeshan kalyani]

Dear Sir,

I would request to briefly explain with all scenario for applicability of service tax under reverse charge is case of rent a car.

As a service recipient whether service tax is payable under following circumstances.

1) A motor car hire - Non-air-conditioned

2) A motor car hire - Air-conditioned

3) A bus for pick-up and drop for employee from home to factory and back - Non-Air-conditioned.

4) A bus for pick-up and drop for employee from home to factory and back - Air-conditioned.

5) A metered taxi is hired whether air-conditioned or non-air-conditioned is exempt from service tax (hope i am right on this)

6) A radio taxi is hired whether air-conditioned or non-air-conditioned is taxable (plz validate my understanding)

7) A air-conditioned or non-air-conditioned bus is hired for a Finance conference to be held at different location. (whether service tax is payable)

I would request to share your view in above scenario where most of the tax executive are scratching there heads for clarity. It would be clear understanding to all the users.

regards,

ganesh

Posts / Replies

[Pradeep Khatri]

Dear Ganesh,

Service tax is levied on services provided by radio taxis or radio cabs, whether or not air-conditioned [section 66D (o)(vi)]. The abatement presently available to rent-a-cab service would also be made available to radio taxi service, to bring them on par. A definition of radio taxi is being included in the exemption notification No.25/2012-ST.

Regards

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[Sunil Kumar]

Dear Sir,

In my understanding if the Radio Taxi is equipped with GPS facility, then only service tax is applicable and not otherwise.

Regards,

CA Sunil Kumar

[Pradeep Khatri]

Dear Ganesh/Sunil,

We are afraid that such plea that a taxi does not have GPS/GPRS would not be sustainable to avoid the liability of service tax, as, if, radio tax does not have the GPS/GPRS, even, then, it would be known as a taxi or would remain as taxi, only. Taxi, Radio Tax or Cabs whether with or without AC or GPS/GPRS is now a wider term and service tax is payable each type of Taxies. There is no way out.

Please go through the relevant provisions once again pertaining to this query. For your ready reference of these provisions are being appended below:-

Para 2.12 of D.O.F. No. 334/15/2014-TRU July 10, 2014.

Service tax is proposed to be levied on services provided by radio taxis or radio cabs, whether or not air-conditioned [section 66D (o)(vi)]. The abatement presently available to rent-a-cab service would also be made available to radio taxi service, to bring them on par. A definition of radio taxi is being included in the exemption notification No.25/2012-ST. Service tax on radio taxi services will come into effect from a date to be notified later, after the Finance (No.2) Bill, 2014 receives the assent of the President.

Definition of Radio Tax

(za) “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);

In our opinion service tax is payable on all types of Taxies.

Regards

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[Sunil Kumar]

Dear Sir,

I would like to bring you attention to definition of radio taxi.

Definition of Radio Tax

(za) “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);

We can see from the above definition that it (radio taxi) requires two attributes i.e.

1) it should have two way radio communication - which is not the case of most of radio taxi. They normally receive communication from their central office and they (taxi) are unable to communicate to their central office using the same tool which is used for receiving messages / calls from central office. and,

2) It should have GPS enabled

So technically speaking only those radio taxi which have these facilities can be considered as radio taxi for applicability of service tax purpose.

Though, I agree with you that we should follow conservative approach and use of radio taxi (as per our understanding in common parlance) should be considered as taxable service. We should follow intent of law.

Regards,

CA Sunil Kumar

[Pradeep Khatri]

Dear Ganesh/Sunil,

Three points are important to determine the taxability of Taxi, Radio Tax or Cabs, namely:-

1. Radio taxi” means a taxi including a radio cab;
2. Each radio cab has two way communication i.e. Central office sends message to pick up certain person and when the driver accepts this message, the communication gets completed. Sending message and accepting it (by different persons) is a two communication.
3. As per the instruction of RTO offices of different States' and jurisdictional Commissioner of State Police, Each and every radio taxi/cab should have GPS/GPRS system to track the locations of taxies, and should be observable 24X7 at the systems/computers installed at their central office. The central office provides the relevant message to pick up the person from the nearest location of taxi by observing the very location of taxi at their computer.

This is for your kind information.

Further, you may also get the clarification from the Department by filing an application in this regard.

Regards

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[Naveed S]

I personally assume that if the Radio Taxi is equipped with GPS facility, then only service tax is applicable.