Service Tax input on AMC

[SARAVANAN RENGACHARY]

Can we charge Service Tax @ 14.5% on 100% value of output AMC and avail Service Tax input on credit on input service of AMC ?.

I am asking this question because, as per Determination of Valuation rules 2012, service tax is payable on 70% of AMC value subject to that service provide is not eligible to avail input credit on any service.

please clarify.

[Rajagopalan Ranganathan]

Sir,

As per rule 2A (i) of Service Tax (Determination of Value) Rules, 2006 if you are able to arrive at the value of service portion of works contract service (AMC service) separately independent of goods supplied while executing the works contract service you can pay service tax @14.5% on the gross value of the service provided by you and you are eligible to avail the credit of duty paid on inputs, capital goods and service tax paid on input services utilized by you for providing the AMC service.

If you are not able to segregate the value of goods supplied and value service provided then under rule 2A (ii) (B) of the above mentioned rule you can pay service tax on 70% of the gross value of the works contract service (value of goods + value of service provided). Explanation 2 of the said rule provides that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004. Therefore this rule does not prohibit you from availing duty paid on capital goods and service tax paid on inputs service as credit. The 30% abatement given to you represents duty payable on goods supplied in the execution of works contract. Therefore the explanation specifically debars you from availing the credit on the inputs. This is my view.

 

[Rajagopalan Ranganathan]

Sir,

In continuation of my reply dated 19.11.2015 under notification No.30 of 2012-ST dated 20.6.2012 (With effect from 1.7.2012) out of total service tax payable on AM

[SARAVANAN RENGACHARY]

Sir,

Thanks for your quick reply.

AI Summary

Service tax input credit eligibility for AMC: segregation of service portion permits full service levy with input credit access.
If the service portion of an AMC (works contract service) can be valued separately, service tax may be applied to the gross service value and CENVAT credit claimed for inputs, capital goods and input services. If segregation is not possible, valuation follows the works contract aggregation with an abatement treating part of the gross value as goods; the rule's Explanation disallows credit for duties or cess on inputs related to the works contract but does not bar credit for capital goods or service tax on input services.