Tuesday, October 16, 2012

SERVICE TAX ON VEHICLE PARKING WEF 01.07.2012


on Tuesday, October 16, 2012

Issue of Vehicle Parking 

Notification No. 25/2012 dated 20.06.2012 provides exemption [vide serial no. 24] with effect from 01.07.2012 to services by way of vehicle parking to general public excluding leasing of space to an entity for providing such parking facility. 

(A) The meaning of term "General Public" 


General Public:For the purpose of this clause ‘general public’ means the body of people at large sufficiently defined by some common quality of public or impersonal nature.


(B) Nature of Services Covered in this Clause 

Under this clause exemption has been provided to services provided by way of vehicle parking to general public excluding leasing of space to an entity for providing such parking facility. With a view to provide relief the general public, exemption has been given to services in respect of vehicle parking. Looking from different prospective, if services by way of vehicle parking are given to a particular individual or group of people, then the benefit of this exemption cannot be availed because that particular individual or group of people do not fall within the scope of term ‘general public’.

On the other hand, if services are provided by way of leasing of space to an entity [business] for providing such parking facility [which, in turn, uses the space for providing parking facility], then the concerned person providing such space can not avail the benefit of this exemption as he is not providing services by way of vehicle parking. On the contrary, he is providing by way of leasing of space for commercial purposes which is a taxable service.

 For instance, Delhi Metro Rail Corporation [DMRC] leases out a space outside a particular Metro Station in Delhi o RKJ Ltd for the purpose of providing Parking facility to Metro commuters at stipulated monthly lease rental of ` 50,000/-. In this case, the foregoing amount of ` 50,000/- charged by DMRC from RKJ Ltd will be subject to Service Tax.

(C) Implications of Deletion of the word ‘motor’ 

It is worth highlighting that Government firstly [originally] issued Notification No. 12/2012 dated 17.03.2012 for the purpose of giving exemption from Service Tax in respect of 34 taxable services. Subsequently, the foregoing Notification was superseded by Notification No. 25/2012 dated 20.06.2012 and number of services in respect of which exemption has been granted has been increased from 34 to 39. However, the point towards which the attention of the readers is attracted is that in the aforementioned Notification No. 12/2012 dated 17.03.2012 the exemption [vide serial no. 24] was granted to “Services by way of motor vehicle parking to general public excluding leasing of space to an entity for providing such parking facility.” As discussed here in before, finally in Notification No. 25/2012 dated 20.06.2012 the exemption [vide serial no. 24] has been granted to “Services by way of vehicle parking to general public excluding leasing of space to an entity for providing such parking facility.” Thus, a careful comparison of Notification No. 12/2012 dated 17.03.2012 and Notification No. 25/2012 dated 20.06.2012 reveals that word ‘motor’ has been deleted in Notification No. 25/2012 dated 20.06.2012. 

The implication of the deletion of the word ‘motor’ is that scope of exemption has been enlarged. In terms of Notification No. 25/2012 dated 20.06.2012 the exemption will not be available to services by way of parking in respect ‘Motor Vehicles’ but in respect of other vehicles which do not fall within the scope of the term ‘Motor Vehicles’[which are powered by an engine] such as Bicycles[which are powered by physical output]  

(D) Departmental Clarification-Taxation of Services-an Education Guide dated 20.06.2012-Guidance Note 7

7.11.7 I have taken on rent a piece of vacant land from its owner. The land will be used for providing the facility of motor vehicles parking on payment. What is my service tax liability? 

You are not required to pay tax on providing the facility of motor vehicle parking to general public.. However, if you are providing the facility of parking of vehicle to a car dealer, you are required to pay tax as parking facility is not for general public. Moreover, land owner is liable to pay service tax on renting of his land to you. 

For the purpose of this clause ‘general public’ means the body of people at large sufficiently defined by some common quality of public or impersonal nature.

(E) Categorisation of Vehicle Parking
  1. Covered Vehicle Parking  :It is subject to Service Tax because space used for constructing the relevant space is considered as a part and parcel of the relevant building. As a result, Service Tax is payable at the same rate at which it is charged in respect of the remaining portion of the building. 
  2. Open Vehicle  Parking : It is subject to Service Tax because there is involvement of construction activity [although comparatively less as compared to Coved Vehicle Parking] even in  respect of Open Vehicle Parking. In different words, open vehicle parking is considered as part of the relevant complex, building, civil structure. Thus, service tax should be levied in respect of open vehicle parking at the same rate at which it is charged in respect of the remaining portion of the complex, building, civil structure. 
By :CA. Roopa Nayak ,CA Pulak Saha ,CA. Rajiv J. Luthia , CA. Ashok Batra, CA. Bimal Jain, CA.  Sumantra Guha 

2 comments: Post Yours! Read Comment Policy ▼
PLEASE NOTE:
We have Zero Tolerance to Spam. Chessy Comments and Comments with Links will be deleted immediately upon our review.

  1. what about parking space provided by builder in a complex

    ReplyDelete
  2. As soon as a notification is published.. the educated start enquiring the related issues... It is expected from the educated people to be intelligent also. Therefore, start focusing on the matter rather than issues retlated to the matter. Question should be whether the matter is acceptable?

    ReplyDelete