Rent - A - Cab Orperator service

[SNEHAL SHAH]

R/sir,

For Renta CAB Operator service under Reverse Charge Mechanism having 2 options;

they are :

 

1) without abatement , Service Provider has to pay ST on 60 percent value of services and Recepient has to pay ST for the rest of 40 percent value. 

2) with abatement of 60 percent Service Receiver has to pay ST on 40 percent value.

 Only in cases where the Service Provider is an individual, HUF, partnership firm, AOP or Trust.

 

My question :

Can we take cenvat credit , if payment under reverse charge without abatement option selected .

For Example:

Service Provider:

Rs.100 Assessable value

Service Tax charge on 60 percent (Service Receiver) – 12.36 percent = Rs.7.42

TOTAL Bill Amount: Rs.117.42

Service Receiver:

Pay Service Tax on 40 percent on Assessable Value Rs.100 i.e. Rs.4.94

 

Is it Cenvat Credit eligible Rs.4.94 as input service or not?

If service provider ( Indivisual , properitor , AOP ) not deposit tax any liability in future on company ?

Please suggest.

Thanks and Regards,

 SNEHAL SHAH

[Brijesh Verma]

Even if tax is paid under RCM, still it remains an Input Service. Therefore if all ingredients of "Input Service" are present, Cenvat can be claimed.

[VINIT AGRAWAL]

Dear Sir (Mr. Verma)

As per the definition of input service, input service excludes-

"²⁰[(B) services provided by way of renting of a motor vehicle], in so far as they relate to a motor vehicle which is not a capital goods; or

Since,the service provided by way of renting of motor vehicle is under exclusion clause for input service tax, can we claim the cenvat credit for the same. please advice for the same

 

Krishna

 

[Brijesh Verma]

Dear Mr. Krishna Singh / Snehal

A very vital and valid point has been raised by you through your counter query and feel pleasure in trying to reply the same. Other experts may also share their views.

It is correct that from the definition of the term "input services" u/r 2(l) of  CCR, 2004 there is an exclusion in respect of Rent-a-cab scheme operators. However, a closer look at that exclusion would make itself very clear that the exclusion relates only to such motor vehicles which are not treatable as "capital goods" u/r 2(a) of CCR, 2004.

Meaning thereby that if renting of cab is done in respect of such motor vehicles which pass the test of being "capital Goods" in the hand of the service provider then input credit is absolutely not deniable. 

Feel free to throw some light, in case I have missed out any vital point.

Regards

Brijesh Verma

9897057757

[Guest]

Due to specific exclusion clause provided in CCR 2004 CENVAT credit is not available, however, you are liable to pay service tax if you avail Rent-a cab service.

AI Summary

Cenvat credit on rent a cab services hinges on whether the rented vehicle qualifies as a capital good under input service exclusion. Whether tax paid by a recipient under reverse charge on rent a cab services is eligible as Cenvat credit depends on the CCR exclusion: renting of a motor vehicle is excluded from 'input service' insofar as the vehicle is not a capital good; if the vehicle qualifies as capital goods for the provider, the exclusion does not apply and credit may be available, while if it does not qualify, Cenvat credit is not admissible, and recipients remain liable to pay tax under RCM.