CENVAT CREDIT IN RENT A CAB

[Rajeev Khulbe]

GOOD MORNING TO ALL EXPERT,

WE ARE A EXCISABLE UNIT. WE HIRED BUSES FOR OUR EMPLOYEE UNDER RENT A CAB. WE DEPOSIT 40% SERVICE TAX UNDER WITH ABATEMENT. SIR MY MONTHLY PAYMENT OF SERVICE TAX UNDER RENT A CAB APPROX 20000 TO 30000 K. SIR CAN WE TAKE CENVAT CREDIT UNDER RENT A CAB. THANKS IN ADVANCE FOR YOUR QUICK REPLY

[Ganeshan Kalyani]

In my view, you certainly cannot take the credit . The service tax is paid on abated value. Thanks.

[KASTURI SETHI]

            "Tour operator" - for transportation of their employees to the residence and vice versa . High Court of Karnataka in the case of CCE v. Stanzen Toyotetsu India (P) Ltd. - 2011 (4) TMI 201 - KARNATAKA HIGH COURT has clearly held that these services are for transportation of employees and credit of tax paid is eligible as input service. Since the issue has already been settled, CENVAT credit of service tax paid on tour operator service is allowed.

 

[vuchcholla Bhaskar]

Dear Sir,

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.

Thanks & Regards

Bhaskar

[Rajeev Khulbe]

THANKS FOR YOUR VALUABLE REPLY BUT SIR WHAT ABOUT SAY IN NOTIFICATION NO.08/2014 ST

 

[DR.MARIAPPAN GOVINDARAJAN]

If abatement is availed service tax is payable 100% by the service receiver. If abatement is not availed service tax is payable 50% by the service provider and 50% by the service receiver.

[KASTURI SETHI]

Agreed with Sh.MARIAPPAN GOVINDARAJAN, Sir. Notification No.8/14-ST dated 11.7.14 allows input service credit in two ways:

(ii) CENVAT credit on input service of renting of motorcab has been taken under the provisions of the CENVAT Credit Rules, 2004, in the following manner :

(a) Full CENVAT credit of such input service received from a person who is paying service tax on forty percent of the value; or

(b) Up to forty percent CENVAT credit of such input service received from a person who is paying service tax on full value;

[Rajeev Khulbe]

SIR ,

WE ARE ALSO PAYING 40% SERVICE TAX ON VALUE

[KASTURI SETHI]

You can take full credit of ST paid by you. In both options ST credit is restricted to 40% of total value.

[Akash Deep]

Dear Rajeev,

i understood that you hired buses. Under notification no. 26/2012 after, 1.10.2014 abatement is available on the services by way of renting of motor cab a bus is certainly not a motor cab, As per motor vehicles Act, a motor cab is a motor vehicle having carrying capacity not more than six passengers excluding driver. It is common knowledge that a bus certainly have carrying capacity more than six passengers. so no abatement on that after. 10.2014.

if your SP claimed abatement under 26/2012 (even though he is providing services by using buses) he is doing it wrong. your service provider has to raise an invoice without claiming abatement.

when your service provider raise invoice without claiming abatement you can not have the benefit of entry 7(a) of 30/2012 as amended you have to go under 7 (b) where both SP and SR shall pay tax to government to the extent of 50% each w.e.f 10.10.2014.

you can take the credit of tax paid by you.

[KASTURI SETHI]

I agree with the views of Sh.Akash Deep, Expert.

[KASTURI SETHI]

Sh.Akash Deep, Expert,

The purpose of posting the judgement of Karnataka High Court on 26.2.2016 in this forum was that Renting-a-Cab was being wrongly classified. Your comprehensive reply has cleared all the confusions. Now concept is clear to all. It is worth saving as ready recknoner, being useful for providing consultancy. Thanks a lot.

[Akash Deep]

Dear kasturi Ji,

Thank you for you appreciation and kind word. i am happy that you find it worthy enough.

[Rajeev Khulbe]

THANKS VERY MUCH TO ALL EXPERT FOR YOUR KIND SUPPORTED. REALY THANKS SIR

[Balkrishna Nawale]

Rule 2(l)(B) of Cenvat Credit Rules 2004 excludes from the definition of input services – Services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods.

Thus cenvat credit is allowed only if motor vehicle is capital goods. Capital goods further as per Rule 2(a)(C) of cenvat credit rules 2004 requires that the motor vehicle should be registered in the name of service provider.

Now my question is when basic rule it self excludes renting of motor vehicle from the definition of input services then how credit of service tax paid on renting of motor vehicle can be allowed and how can these notification provide for taking credit.

[GHANSHYAM GUPTA]

I agree with Mr. Balkrishna rent a cab is excluded from input service tax definition. Therefore when a service is not come under input service then how can I get CENVAT credit.

AI Summary

Cenvat credit on rent a cab: eligibility depends on abatement, vehicle classification and input service exclusion. CENVAT credit on renting of motor cab services is conditionally allowable: full credit when the provider pays tax on an abated forty percent value, or credit limited to forty percent when the provider pays tax on full value; if abatement is inapplicable (for example where buses are used) tax treatment changes and parties may share liability. Renting of motor vehicles that are not capital goods is excluded from 'input service,' and the capital goods exception requires provider registration, creating a tension between exclusionary rules and notifications permitting credit.