Service tax credit on Accommodation charges

[SURYAKANT MITHBAVKAR]

We have paid Accommodation charges to our customer alongwith service tax @8.4% charged by Hotel.

Can we avail service tax credit for the same.

[PAWAN KUMAR]

Dear Sir,

If the stay in the hotel is for business purpose and you have the proof of the same, you may claim cenvat credit as per my view.

[DR.MARIAPPAN GOVINDARAJAN]

Yes, what Sri Pawan Kumar says is correct.

[KASTURI SETHI]

I endorse views of both experts.

[YAGAY and SUN]

The phrase 'Business Activity' had been deleted from the definition of Input Services. Now, the moot question whether such availment would be allowed or not. Need further discussions on this matter.

[DR.MARIAPPAN GOVINDARAJAN]

Whether your are a manufacturer or a provider of output service?

[KASTURI SETHI]

Sir,

Undoubtedly the phrase,'activities relating to business' does not exist in the definition of 'input service' under Rule 2 (I) of Cenvat Credit Rules, 2004 but it is natural that input service credit can be availed and utilized for providing only taxable output service or in or in relation to manufacture and clearance of dutiable final product.

During my service I detected such cases wherein the phrase, 'activities relating to business' was misused by the assessees. Hence it has been omitted. Here in this case we can presume that 'stay in the hotel' is in relation to providing taxable output service. Business does not mean out of scope of taxable service or out of scope of the term 'in or in relation to manufacture of dutiable goods'.

[Ganeshan Kalyani]

With due respect to above experts I understand from the query that queriest has paid the amount to customer who paid to hotel for his stay. If the bill is in the name of queriest then discussion is fruitfull otherwise no. However I have observed in practical the credit on hotel stay is objected by the department.

[KASTURI SETHI]

Sh.Ganesh Kalyani Ji,

Sir, it is for your kind information that recently in the month of November, 2015, one Range Officer raised an objection on this very issue of input credit of service tax paid on hotel accommodation by way of letter only in the case of one of my clients in Chandigarh. Matter was brought to the notice of jurisdictional Deputy Commissioner and discussed in detail. Since credit was utilized in relation to taxable output service, so D.C. closed the file. No SCN and no further any letter.

I agree with you that discussion is fruitful only if bill is in the name of querist. In other words, assessee has to prove stay in the hotel is in relation to providing taxable output service. Sh.Pawan Kumar also wants to convey this message.

[Ganeshan Kalyani]

Thanks for information Sir.

AI Summary

Cenvat credit on hotel accommodation permitted where stay is for business and invoice links to taxable output service.
Cenvat credit on hotel accommodation is allowable when the stay is for a business purpose, the invoice is in the assessee's name, and the service is in relation to providing a taxable output service or to manufacture and clearance of dutiable goods; deletion of 'activities relating to business' from the input-service definition restricts misuse but does not prevent claims where a clear nexus and documentary proof exist.