Input Services Credit

[Chetan Pawar]

Dear All,

We are the manufacturing unit but as per our Order terms we are supplying the Chemicals as well as  we are providing the Technical & Testing service to our customer, for providing the mentioned service, we have deputed our employee on Site. we are paying his Hotel rent charges, Vehicle Hiring (For Employee Traveling purpose) Charges, Other Charges related to providing service. Please confirm me the can we eligible to availing input service tax credit on above mentioned services?

[Rajagopalan Ranganathan]

Sir,

           You are providing the Technical & Testing service to your customer in respect of the chemicals manufactured and supplied to your customer by deputing your employee.  If the gross amount charged by you for providing such service includes the amount spent by your employee for Hotel rent charges, Vehicle Hiring (For Employee Traveling purpose) Charges, Other Charges related to providing service and you pay service tax on the gross amount charged then you can avail the credit of  service tax paid on other charges related to providing the service. Service tax paid  in respect of  vehicle hiring charges paid for your employee' s traveling purpose is not covered by definition of 'input service' as mentioned in rule 2 (l) of CENVAT Credit Rules, 2004.  Service tax paid on hiring accommodation in the hotel for your employee can be availed as credit since it is in connection with providing the output service namely Technical & Testing Service. 

       Though hiring a vehicle for the purpose travel by your employee is also in connection with providing output service, services provided by way of renting of a motor vehicle is specifically excluded from the definition of input service vide rule 2 (l) (B) of CENVAT Credit Rules, 2004.  Hence you are not eligible to avail such credit.

AI Summary

Input service credit denied for motor vehicle hiring; hotel and other service charges may qualify when taxed as part of the output service.
Input service credit is available for service tax paid on other service-related charges and on hotel accommodation when those expenses are included in the gross amount charged for the Technical & Testing output service and service tax is paid, but service tax on hiring/renting of motor vehicles for employee travel is explicitly excluded from 'input service' under the CENVAT Credit Rules and therefore not eligible for credit.