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Tax on Rent A Car - Printable Version

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Tax on Rent A Car - AbdulSamad - 08-11-2011 07:52 PM

WE are Exchange Co Pvt Ltd. Is there any tax applicable on Rent A Car?

Please advise with particulare section and rate.


- student_of_law - 08-11-2011 08:26 PM

What do you mean by tax applicable on rent a car? Income Tax, Sales Tax or Withholding Income Tax.

any person who is in the business of rent a car has to pay income tax upon his earning under the head income from business.

If you mean to say that while making payment to rent a car do you have to deduct tax as withholding income tax, then the answer is yes. The tax shall be deducted u/s 153(1)(b). I think rate of tax deducted shall be 2% as applicable on transport business. [Division III of Part III of First schedule]. Section 50(4) was the section in the repealed Income Tax Ordinance, 1979, corresponding to current s.153 of Income Tax Ordinance, 2001. Under s.50(4) also, tax was to be withheld while making payments on account of services. Explaining this section, FBR, then CBR, in its letter C.No.1(17)WHT/91 dated 18.11.1992 clarified that renting of vehicles amounts to provision of services to which provisions of s.50(4) of the ITO, 1979 are applicable. As earlier stated s.50(4) of ITO, 1979 and s.153 of ITO, 2001 are corresponding provisions.

If you mean whether any sales tax is payable on rent a car service, then the answer is NO, as far as province of Sindh is concerned. Sales tax on services is a provincial subject. Sindh Sales Tax Act, 2011 enlists in its Second Schedule, Services upon which sales tax is chargeable. Rent a car bears Custom Tariff heading No. 9819.3000. This heading is not included in Second schedule of Sindh sales Tax on services act, 2011. Therefore no sale tax is chargeable to rent a car service.


- AbdulSamad - 08-15-2011 06:56 PM

Thank You very much.


- Information Consultant - 12-10-2011 05:59 PM

Student of law r u confirmed that rate of tax on payment against rent a car is 2 % and it is fall under transport buisness not in services ?


- student_of_law - 12-10-2011 07:54 PM

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Information Consultant</i>
<br />Student of law r u confirmed that rate of tax on payment against rent a car is 2 % and it is fall under transport buisness not in services ?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Firstly, I refer to your words, "fall under transport business and not in services".

Transport service is a category of service and it is also taxed as services u/s 153(1)(b). Para (2) of Division III of Part III of First Schedule makes it clear as it gives the rate of tax deducted u/s 153(1)(b).

By confirm if you mean to say that whether I have backing of any circular or case law, the answer is no. This is why I used the words "I think". However on plain reading of law it suggests that the rate applicable will be 2%. It is pertinent to note that legislature has used the word transport services not even public transport services (that may give rise to contention that should private transport contractors be treated as public transport).

So I am of the opinion that tax deduction should be @ 2% under s.153(1)(b)


- Information Consultant - 12-11-2011 12:32 AM

thanks


RE: Tax on Rent A Car - Jay - 02-19-2015 02:07 PM

Renting of Vehicles-Provisions of Section 50(4) are applicable;
following is the text of CBR's letter C.No 1(17)WHT/91 dated November 18,1992;-

"I am directed to refer to your letter dated 5-10-1992 on the subject and to say that renting of vehicles amounts to provision of services to which provisions of section 50(4) of the Income Tax Ordinance, 1979 are applicable. The payments for services are subject to deduction of tax @ 5%".

Rent a car is a service which doesn't fall under transport services, hence the higher rate of services will be applied. Company 8% and Others 10%