Cenvat credit availment on rent a cab service

[Asked by Guest]

Dear Sir, We as a input service distributor of a mfg co are paying service tax on rent a cab service on 40% of value , So can we avail cenvat credit on such service tax paid under rcm.pls explain thanks and regards

[YAGAY and SUN]

Dear Sandesh,

W.E.F. 01-04-2011 onwards, you cannot avail or distribute the CENVAT credit on Rent - a- Cab service, as it has been specifically denied in the definition of Input Services under Rule 2(l) of the CENVAT credit Rules, 2004 as amended from time to time.

Regards

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[YAGAY and SUN]

Dear Sandesh,

The condition against entry No. 9 is amended with effect from 1st October 2014, to allow the credit of input service of renting of a motor cab if such services are received from a person engaged in the similar line of business i.e. a sub-contractor providing services of renting of motor cab to the main contractor. The whole of the CENVAT credit has been allowed with respect to input service of renting of any motor cab, received from a person who is paying service tax on 40% of the value of services. The CENVAT credit eligibility will be restricted to 40% of the credit of the input service of renting of any motor cab if service tax is paid or payable on full value of the services i.e. no abatement is availed.

[Ganeshan Kalyani]

Dear Pradeep Sir,

However the amendment vide notification no.8/2014 dated 11th July, 2014 specify the changes in conditions colomn to original notification no. 26/2012 dated 20th June, 2012 regarding the cenvat credit availment. The notification implies the credit can be availed by rent-a-cab service provider on his input service paid to service provider providing service in similar line of business. Hence, your post where cenvat credit on Rent-a-cab service is not available stands right even after amendment notification. Kindly validate my understanding.

regards,

ganeshan

[YAGAY and SUN]

Dear Ganesh,

Please read our both reply carefully. One reply relates to non availability of CENVAT credit on Rent a cab service to normal service recipients like you and other reply relates to same line of business.

Even TRU has the same views.

Regards,

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[Ganeshan Kalyani]

Dear Pradeep sir,

I agree to your point, but i was refering with respect to Mr.Sandesh Shinde query saying that the manufacturer who is service recipient of rent-a-cab service is not allowed to avail cenvat credit on said service as the rent-a-cab service has been specifically denied in the definition of Input services under Rule 2(l) of the CENVAT credit Rules, 2004 as amended from time to time.

regards,

ganeshan

[Arun Kumar Singh]

You cannot take the cenvat credit of duty paid under reverse charge system for rent a cab. other than these services you can avail the cenvat credit.

VERY SIMPLE:- In case if you avail the abatement, you are not eligible for Cenvat Credit. In case if your service provider not availed abatement and charged tax, then you are eligible to take credit.

AI Summary

Cenvat credit on rent a cab services depends on abatement, provider status, and same line business exception.
CENVAT credit on rent a cab services is generally excluded where the service is defined outside Input Service and where abatement is availed; credit is available if the provider does not avail abatement and charges tax. An amendment creates an exception allowing full credit when the service is received from a person in the same line of business (e.g., a sub contractor), while where tax is paid on full value (no abatement) credit is restricted to 40% of the input service credit. Reverse charge payments for rent a cab are not eligible for credit.