Queries on taxation and service tax liabilities, addressed by Vivek Sharma and Manav Saneja of Ernst & Young
We are in the business of trading in steel coils and use rent-a-cab services for our directors in Delhi. During 2012-13, we paid R525,000 to our cab vendor, which is a partnership concern, on account of rent-a-cab services received from them. In this regard, please let us know whether we are liable to pay service tax on the services under the current service tax regime. If yes, then what is the extent of liability to be borne by us? Also, whether we are also required to obtain service tax registration?
Under the erstwhile regime of taxation of services prior to introduction of negative list based on a positive list of services (as applicable prior to July 1, 2012), service tax on rent-a-cab service was payable by the service provider only.
However, with effect from July 1, Service tax liability arising on account of rent-a-cab services is required to be borne partially by the service recipient under the reverse charge mechanism, in cases where the services are rendered by an individual, HUF, partnership firm or an association of persons. Hence, you would be required to discharge service tax under reverse charge mechanism on rent-a-cab services received by you from cab vendors.
The extent of service tax liability to be discharged by you would depend upon whether cab vendor has claimed abatement on the value of services provided by them. In both situations, i.e., whether the cab vendor has claimed abatement or not, your liability would be 12.36% of 40% of total service value. Section 69 of the Finance Act, 1994 has made it mandatory for every person liable to pay service tax to register under the service tax. So, you would be required to obtain registration as a service recipient.
Tax on consultancy fees
We are in the business of manufacturing pharmaceuticals since 2004-05 and avail of certain management consultancy services from a consultancy in the USA every year since inception. We have not been discharging service tax on such services received from the consultancy. We have been informed that the service tax should be discharged on such services received by us from outside India since inception. Please let us know whether we are liable to discharge Service tax on consultancy services received and from when are we required to discharge service tax.
Under the erstwhile regime of