Service Tax - Whether 'car lease scheme' of providing vehicles to employees would be regarded as ‘service'

It is rightly pointed out in the DDT that the services provided BY AN EMPLOYEE TO THE EMPLOYER in the course of or in relation to his employment are not covered under the definition of ‘service’. Whereas, in 2015-TIOL-12-ARA-ST, the employer is providing service to employee. At Para 6 of this Ruling, it is mentioned, “There can be no dispute that here the applicant is an employer and the applicant is providing some service to its employees by giving an option to all such employees to avail of a car.” This activity is neither excluded from the term ‘service’ nor covered under Negative List / Exemption Notification. Therefore, such activity seems to be qualified as ‘service’ and taxable.

However, as mentioned at Para 3 of the Ruling, “service which is provided by the car leasing company to the applicant is being taxed under the regime of the service tax. There is no dispute over this.” Therefore, Cenvat Credit of service tax paid by the car leasing company would be available to the applicant/employer, if he pays service tax on the said service provided by him to employees. It is also mentioned at Para 2 of the Ruling that the company (employer) was to charge the said employees the same amount which the applicant (employer) would be paying to the car leasing company. Therefore, service tax can be fully paid by the employer from the Cenvat credit of service tax paid by the car leasing company; and there would be no extra liability to pay service tax in cash by the employer.

As the Ruling given by the Authority of Advance Ruling is binding on the particular case and particular assessee, it may not be used as precedent in other cases.

These are personal views.

Shvetal Parikh 30/12/2015