Input credit in Restaurant Service

[deepak gulati]

Dear Experts,

In Restraurant Service we are claiming Abatement of 60% as prescribed, the premises are on Rent and we are paying Service Tax on same.

Please clarify that we should claim full Input of Service Tax paid on Rent or we can claim 40% of same.

[PAWAN KUMAR]

Dear Sir,

As per my view, you may claim cenvat credit of service tax paid to the extent of 40% amount. If you claim in full, proportionate cenvat is to be reversed as per rule 6 of Cenvat Credit Rules, 2004.

[PAWAN KUMAR]

Dear Sir,

Please ignore my previous reply, There is no restriction on taking cenvat of input services and capital goods except the inputs of chapter 1 to 22 of first schedule to central excise tariff, 1985. Therefore full cenvat credit of service tax paid on rent can be claimed.

[KASTURI SETHI]

The sale of food in the restaurant would amount to clearance of exempt goods. Therefore, the provisions of Rule 6 of Cenvat Credit Rules will be applicable for reversal of credits.This is in addition to restrictions of inputs classifiable under Chapter 1 to 22 of Central Excise Tariff Act, 1975. Notification No.24/2012-ST dated 06.6.2012 (Explanation-2) refers.

Other restrictions:-

1.Service Portion in the execution of a works contract and construction service

2. Renting of Motor Vehicles

3. Service of general insurance business

4.Servicing, repair and maintenance of a motor vehicle which is not a capital goods

5. Such services which are used primarily for personal use of any employee

[DR.MARIAPPAN GOVINDARAJAN]

I agree with Shri Kasthuri.

AI Summary

Input credit on rent may require proportionate reversal under cenvat rules when restaurant food sales are treated as exempt. Input credit on service tax paid for rented premises in restaurant operations is contested between a restricted apportionment approach tied to abatement and a view permitting full Cenvat Credit except for inputs excluded by tariff classification. If the restaurant's food sales are treated as exempt supplies, proportionate reversal of credit under Rule 6 and related explanatory notifications applies. Specific service categories are also identified as ineligible or limited for credit.