Service tax on leased cars for employees under reverse mechanism

01.   Service Tax is payable only for service.

02.   Service does not include transactions covered  under article 366 clause 29A of the constitution. which is given below.  (same had been amendment in the budget 2012) para 44 clause ii  page 71.

 Article 366(29) in The Constitution Of India 1949

(29) tax on income includes a tax in the nature of an excess profits tax;

(29A) tax on the sale or purchase of goods includes

(a) a tax on the transfer, otherwise than in pursuance of a contact, of property in any goods for cash, deferred payment or other valuable consideration;

(b) a tax on the transfer of property in goods (whether as goods or in some other form) invoked in the execution of a works contract;

(c) a tax on the delivery of goods on hire purchase or any system of payment by instalments;

(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;

(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;

03.   The transaction of lease car is now covered under aforesaid sub clause d and hence service tax is not payable on leased cars.

04.   VAT is also not payable as the amount per annum from each vendor is less than Rs. 5 Lakhs.