SERVICE TAX ON RENT A CAB AND MAN POWER SUPPLY, Service Tax

[Rajeev Khulbe]

GOOD EVENING SIR,

WE ARE TAKING SERVICE UNDER RENT A CAB. SIR I WANT TO KNOW ONLY THAT

1- IF SERVICE RECEIVER IS FIRM ( Proprietorship concern OR Partnership firm WHO ARE NOT REGISTER AS LLP) THEN WHO WILL PAID SERVICE TAX ON RENT A CAB AND MAN POWER SUPPLY.

THANKS FOR VALUABLE REPLY

Posts / Replies

[Ganeshan Kalyani]

Sir, reverse charge is applicable only when the receiver of service is a body corporate and provider is individual, but, firm. In other case service tax is paid under forward charge. Thanks.

[Rajeev Khulbe]

SIR

CAN YOU EXPLAIN ME ABOUT FORWARD CHARGE

[Ganeshan Kalyani]

Sir, forward charge means the service provider is liable to pay service tax. Thanks.

[KASTURI SETHI]

Sh.Rajeev Khulbe Ji,

In order to avail the facility of partial or full RCM under Notification No.30/12-ST dated 20.6.12, there are two conditions:

1. Service Provider must fall under the category of Individual, Prop., Partnership firm, HUF, AOP etc.

2. Service receiver must be business entity registered as body corporate.

Thus Proprietorship or Partnership firm (including LLP) are not eligible for RCM. SP will pay ST in both services.

 

 

[Ganeshan Kalyani]

Thanks Sri Kasturi Sir for clarifying the issue. Thanks.

[Rajeev Khulbe]

Good morning experts and thanks for give your valuable time. but sir only one doubt can you give me some example regarding which company, firm etc comes under business entity and body corporate

[KASTURI SETHI]

Sir,

It is very simple. Search on google. Type what is business entity and what is body corporate. You will find the answer. There are so many examples. I think it is not out of your reach.

[Ganeshan Kalyani]

Yes sir Google provides so many information in a second. It has made life easy. One day is was asked by my collegue where is Samba. I was clueless then I went to Google and within a second i got answer. Samba is in J&K, an industrial area. Lot of petty thing we do not know and we hesitate to ask somebody by thinking that what our image will be in his eyes. Google is a best search engine. Explore it. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Good example given by you. It is a source of inspiration for every visitor of this site. I also want to share very true experience. One of my close relatives (age 28), is an B.A.LL.B. No link with computer at all. He is repairing software of every type. He has established his shop in a small town. He is so busy in his work that he works in his shop for 12 hours continuously. I asked him from where you have got training of repairing software.He replied to me,"Google is my guru". Four persons are working under him in his shop.

During audit of Pepsi unit, I came across a person who was B.Com and with practice he repaired software of his firm. Firm determination yields results.

[JSW CEMENT LIMITED]

Dear Mr. Rajeev,

With the PAN no. of the firm or company you can identify if its a LLP or Individual or Corporate body.

[Rajeev Khulbe]

SIR,

I HAVE ONE DOUBT REGARDING APPLICABLITY OF SERIVCE TAX ON SERVICE PROVIDER. SIR IF SERVICE RECEIVER IS FIRM THEN LIABLITY OF SERVICE TAX IN CASE OF RENT A CAB AND MAN POWER SUPPLY ON SERVICE PROVIDER. BUT SIR IF SERVICE PROVIDER TOTAL SERVICE PROVIDED LESS THEN 10 LAKH.. THEN WHAT HAPPEN IN THAT CASE WHO WILL PAID SERVICE TAX ON RENT A CAB AND MANPOWER SUPPLY

[KASTURI SETHI]

Sh.Rajeev Khulbe Ji,

Go through very comprehensive reply posted by Sh.Akash Deep, an expert in respect of Issue Id no.109723 dated 16.1.2016.

[KASTURI SETHI]

In respect of 'manpower supply' if service provider is individual, prop. firm, partnership firm, HUF firm, AOP etc. and service receiver is business entity registered as body corporate 100% liability is on receiver w.e.f 1.4.15.( 100% liability on service receiver is not effected, even if turnover of the above mentioned firms (Service Providers) is less than ten lakhs.

In respect of 'Rent-a-cab' if turnover of service provider firms (mentioned above individuals etc.) is less than Rs.ten lakhs, Service Receiver will discharge its own liability.

[Rajeev Khulbe]

THANKS FOR YOUR VALUABLE REPLY. BUT SIR I THINK THAT YOU ARE NOT AWARE FROM MY QUERY. SIR MY QYERY WAS REGRDING FOLLOWING.

I ASKED FIRSTLY FROM MY FAVOURITE EXPERT THAT

Q = IF SERVICE RECEIVER IS FIRM ( Proprietorship concern OR Partnership firm WHO ARE NOT REGISTER AS LLP) THEN WHO WILL PAID SERVICE TAX ON RENT A CAB AND MAN POWER SUPPLY.

ANSWER = THEN YOU SAY THAT SERVICE PROVIDER WILL PAY SERVICE TAX BECAUSE SERVICE RECEIVER ARE NOT BODY CORPORATE.

SIR MY SECOND QUESTION WAS

Q = IF SERVICE PROVIDER TOTAL SERVICE PROVIDED LESS THEN 10 LAKH.. THEN WHAT HAPPEN IN THAT CASE WHO WILL PAID SERVICE TAX ON RENT A CAB AND MANPOWER SUPPLY . BECAUSE SSI LIMIT NOT APPLICABLE ON SERVICE RECEIVER BUT APPLICABLE ON SERVICE PROVIDER.

ANSWER = SIR YOU ARE SAYING THAT IN THAT CASE SERVICE RECEIVER WILL PAY HIS SERVICE TAX LIABLITY . BECAUSE SERVICE PROVIDER TOTAL TURNOVER LESS THEN 10 LAKH. BUT SIR SERVICE RECEIVER ALSO A FIRM NOT BUSINESS CORPORATE . THEN WHY HE WILL PAID SERVICE TAX @ 40% . THAT REASON I WANT TO KNOW

THANKS SIR,

RAJEEV

NAINITAL ( UTTARAKHAND)

[JSW CEMENT LIMITED]

Dear Mr. Rajeev,

Wherever a service provider is not a body corporate and are either a proprietorship concern or partnership firm, the payment of service tax will be at the hands of service receiver being a body corporate. In the case of Manpower supply 100% liability will be on service receiver whether the service provider is registered or not and whether his turnover is less than 10 lacs or not.

In the case of Rent-a-Cab, if the service provider is registered one, then he has two option for payment of service tax. If he avails credit of capital goods or input services availed for providing the output service and avails service tax credit then he has to pay 50% service tax and balance 50 % shall be paid by service receiver. In case he does not avail service tax credit, under that situation service receiver shall pay service tax on 40% value of the service. If the service provider is not registered, then also service receiver has to discharge his liability of service tax on 40% value.

In the case of reverse charge, it is mandatory on Service Receiver to discharge his portion of liability irrespective of whether the service provider is a SSI unit or otherwise.

[Rajeev Khulbe]

THANKS FOR YOUR REPLY,

BUT SIR IF SERVICE RECEIVER IS NOT A BODYCORPORATE. THEN STILL HE WILL PAID SERVICE TAX

BECAUSE AS PER RCM

NATURE OF SERVICE SP SR

RENT A CAB INDIVIDUAL,HUF,FIRM BODY CORPORATE

MAN POWER AS ABOVE AS ABOVE

AS PER ABOVE DETAIL IF SERVICE RECEIVER IS FIRM THEN HE WILL NOT PAID SERVICE TAX.

[KASTURI SETHI]

Sh.Rajiv Khilbe Ji,

You have not read reply of Sh.Akash Deep, Sir against Issue Id no.109723 dated 16.1.2016.

I agree with reply of JSW CEMENT LTD. subject to the eligibility criteria of RCM/PRCM mentioned in my reply dated 2.8.16.

I think there is no need to explain further.

[Rajeev Khulbe]

SIR,

MY QUERY IS DIFFERENT . SIR I KNOW THAT AS PER RCM SERVICE RECEIVER LIABLITY OF SERVICE TAX IN BOTH CASES RENT A CAB AND MAN POWER SUPPLY. IF SERVICE RECEIVER WILL BE BODY CORPOPRATE. BUT SIR MY CASE IS DIFFERENT FROM ABOVE

SIR IN MY FIRST QUERY

1 = SERVICE RECEIVER IS FIRM NOT BODY CORPORATE. SO AS PER RCM FIRM ARE NOT COVERED UNDER RCM IN CASE OF RENT A CAB AND MAN POWER SUPPLY.

SECOND CASE IS

2 = OUR SERVICE PROVIDER TURNOVER IS LESS THEN 10 LAKH (SSI LIMIT IS APPLICABLE ONLY ON SERVICE PROVIDER BUT NOT SERVICE RECEIVER) SERVICE RECEIVER ALSO FIRM. NOW SIR IF FIRM ARE NOT CAME UNDER RCM THEN WHY HE WILL PAID SERVICE TAX WHEN HE IS FIRM AND SERVICE PROVIDER TURN OVER LESS THEN 10 LAKH.

SORRY SIR FOR MORE ARGUMENT. BUT I AM LITTLE BIT CONFUSED REGARDING FOLLOWING THAT

WHO WILL PAID SERVICE TAX WHEN

SERVICE PROVIDER TURN OVER LESS THEN 10 LAKH AND SERVICE RECEIVER IS FIRM ( WHICH IS NOT PART OF RCM. SOMEONE WILL PAY BUT WHO WILL PAID ???

SIR I THINK NOW YOU UNDERSTAND WHAT I WANT TO KNOW.

RAJEEV

NAINITAL UTTARAKHAND

[JSW CEMENT LIMITED]

Other than body corporated, limited companies, private limited companies, if service of rent a cab or Manpower supply is provided by any other individual, partnership firm or LLP, service tax has to be discharged under reverse charge. Under the situation, if a firm has turnover less than or more than 10 lacs, service receiver has to discharge his liability under the provision of section 68(2) of Finance Act. For more clarity, you can refer clause F of rule 2(d) of service tax rules 1994 which is reproduced below:

(F) in relation to services provided or agreed to be provided by way of :-

(a) renting of a motor vehicle designed to carry passengers, to any person who is not engaged in a similar business; or

(b) supply of manpower for any purpose ¹⁹[or security services]; or

(c) service portion in execution of a works contract-

by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as a body corporate, located in the taxable territory, both the service provider and the service recipient to the extent notified under sub-section (2) of section 68 of the Act, for each respectively.

I hope the above clarifies both of your query.

[Ganeshan Kalyani]

Dear Rajeev, here is your reply for both the query:-

1) Service tax shall be paid by service provider as the recipient of service is not a body corporate and therefore reverse charge is not applicable. The liability is payable by service provider under forward charge.

2) No service tax is payable as the turnover of the service provider is below the SSI exemption limit of ₹ 10 Lacs. Also the recipient is not a body corporate and therefore reverse charge is not applicable. The provider of the service is liable to pay service tax under forward charge, but since the turnover is within the taxable limit there is no service tax liability. Thanks.

In case any further query please go through the experts reply in the issue id referred by Sri Kasturi Sir. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

You have correctly understood and nicely explained. Your reply is precise of the replies of all experts and you have conveyed to the point without going into complicated details of 'What is business entity ? What is body corporate ? What is the eligibility criteria of RCM ?' This is what Sh.Rajiv Khulbe wanted in simple words.

[Rajeev Khulbe]

THANK YOU SIR SPECIALLY TO Sh.Ganeshan Kalyani Ji, & KASTURI SETH & ALL OF MY FAVOURITE EXPERTS.

[KASTURI SETHI]

Sh. Rajeev Khulbe Ji,

I am overjoyed to read that finally you are satisfied with the replies of experts. Appear again with such thought provoking query ( Thorny query ?) for brain exercise.