service tax credit on rent a cab service eligble-reg

[Ramakrishnan Seshadri]

Dear Sir,

We are manufacturer of automobile parts and having 3 plants situated at different places. We have entered into contract with the transport service providers for transporting our staff from specific points to our units. The transporters are registered with the service tax department and we are discharging service tax for the 40% of the bill value.

Now our question is whether service tax paid on rent a cab service is eligible or not.if not what is the reason

Could anybody give us opinion .

Thanks & Regards,

S.Ramakrishnan

[CSSANJAY MALHOTRA]

Refer to Input Service Definition under Rule 2(L) as provided in CENVAT Credit Rules 2004 and amended on 01.03.2011, which provides Exclusions as below:-

(B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods;

Capital Goods are defined under Rule 2(a) of CCR 2004 which are restricted to Goods falling under Chapter 82, 84, 85, 90....... Motor Vehicles are covered under Chapter 87 of Central Excise Tariff Act 1985.

Hence, in view of above, CENVAT Credit is not eligible on Renting a Cab service as the same is covered under Chapter heading 87 of Central Excise.

[MUKUND THAKKAR]

our question is whether service tax paid on rent a cab service is eligible or not.if not what is the reason?

As per the revised definition of input service, following is the wasteful expenditure and do not deserve any Cenvat credit, as per department’s view.

* Factory and office building (We are a free society. Indians do every conceivable thing in open. Hence, department is of vies that production or provision of service or administration should be done in open)

* Motor vehicle is a luxury even if used to transport employees or for business purposes [Sales and purchase people can either go by bus or by air since air travel can be allowable input service]

* All employee benefits line transport, canteen facility, health care, insurance, welfare expenditure is a pure waste [Company should employ only casual labour at minimum wages with no benefits].

AI Summary

Cenvat credit on rent a cab service disallowed where motor vehicle exclusion applies, limiting input service credit.
Cenvat credit is not available on renting a cab for staff transport because the input service definition excludes services related to motor vehicles, and motor vehicles are not treated as capital goods for this purpose unless they are used to provide taxable services that permit credit; absent that use and tariff classification, rent a cab charges are non creditable.