EXEMPTION TO TRANSPORT OF PASSENGERS SERVICES.

[Dr. Sanjiv Agarwal]

Following type of transport of passengers shall be exempt from Service Tax –

Transport of passengers, with or without accompanied belongings, by -

(a)  air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal;

(b)  a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire; or

(c)  ropeway, cable car or aerial tramway;

Contact carriage is defined in section 2(7) of the Motor Vehicles Act, 1988. Accordingly,

“Contract carriage means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorized by him in this behalf on a fixed or an agreed rate or sum —

(a) on a time basis, whether or not with reference to any route or distance; or

(b) from one point to another, and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes —

(i) a maxicab; and

(ii) a motor cab notwithstanding that separate fares are charged for its passengers”.

The ingredients of a contract carriage are as follows :—

• It carries passengers for hire or reward;

• It is engaged in contract whether expressed or implied for use of such vehicle as a whole;

• The contract must be entered into by the person with the holder of permit in relation to such vehicle or with any person authorized by him;

• The agreed consideration can either by on time basis or one point to another;

• The vehicle should not stop to pick up or set down passengers not included in the contract anywhere during the journey;

• It includes maxi-cab or motor-cab.

In cases where a bus operates on a route under a contract carriage and passengers embark or disembark from the bus at any place falling on the route and pay separate fares for the whole or for stages of journey, no Service Tax would be payable. However, transport of passenger in a contract carriage for the transportation of passengers for tourism, conducted tour, charter or hire is taxable.

 

 

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