Regarding cenvat credit on service tax on rent a cab

[Rajeev Khulbe]

Good morning to all my great experts.

Every time when I face any problem.then you all my great experts help me. But yesterday experience I want to share with you. Yesterday our financial excise and service tax audit.then in one point more argument between audit team and us .that point was cenvat credit on rent a cab.auditor told us that why are you taking cenvat credit on rent a cab then we told us as per notification no.08/2014 service tax we can take cenvat credit on rent a cab because as per notification if we will DEPOSIT SERVICE TAX @40℅ on abated value on rent a cab then we can take credit on it. But Auditor told us that this rule for SERVICE provider not service receiver . He told that if service provider is private limited company then he will deposit 40℅ service tax not service receiver not deposit service tax.sir I want to know that auditor was right .can we not claim cenvat credit on rent a cab.

Thanks

Rajiv

Nainital

[Rajagopalan Ranganathan]

Sir,

Notification No. 30/2012-ST dated 20.6.2012 (Reverse Charge Notification) vide Sl. No. 7 (a) provides that in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business the 100% of the service tax liability falls on the receiver of service. Again vide sl. No. 7 (b) of the same Notification provides that in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business 50% of service tax liability falls on the service provider and 50% of the tax liability on service receiver.

Notification No. 8/2014-ST dated 11.7.2014 (w.e.f. 1.10.2014) amends Sl. No. 9 Notification No. 26/2016ST dated 20.6.2012 as Renting of motorcab instead of “any motor vehicle designed to carry passengers”. since you are saying that you have paid service tax on 40% of the value charged by the service provider as Sl. No. 70 (a) of Notification No. 30/2012-ST you have to pay 100% of service tax liability as service receiver and you are entitled to take credit of such service tax paid by you. The abatement of 40% is applicable only to service receiver and not to service provider. When the service tax liability is shared by the service provider and the service receiver At the rate of 50% each only when service tax is paid on non-abated value. This is my view.

[Rajeev Khulbe]

SIR,

IF I WALL DEPOSIT SERVICE TAX WITHOUT ABATEMENT MEANS 50 % OF VALUE THEN CAN WE TAKE CENVAT CREDIT ON IT

[Rajagopalan Ranganathan]

Sir,

If you pay 50% tax on un-abated value then you are eligible to take credit not only the tax paid by you on RCM basis but also the remaining 50% paid by the service provider. Even if you have paid tax of 100% on the abated value you are eligible to take credit.

[KASTURI SETHI]

Sh.Rajiv Khulbe Ji,

Notification No.8/14-ST dated 11.7.14 allows input service credit but not more than 40 % of ST. (Earlier Input service credit was not allowed under basic notification no.26/12-ST against serial no.9 Col. no.4). Whether to avail abatement or not, is option of Service Provider. Whether abatement is availed or not, Govt. would get ST on 40% of the value of the service as per Serial No. 7 (a) and (b) of Notification No.30/12-ST. Now the question arises of sharing of ST by 50 % between SP and SR. RCM is applicable only if SP is Individual, Partnership, HUF etc. and SR is body corporate. If situation is reverse, RCM would not be applicable and entire liability is cast upon the SP. Hence in that situation, there would be no sharing of ST between the two.

[Rajeev Khulbe]

SIR,

IS THIS NOTIFICATION (08/2014 ST.) FOR SERVICE RECEIVER.WHEN HE USING MOTOR CAB ( OTHER THEN MOTOR VECHICLE)) AND DEPOSIT 40% SERVICE TAX ON ABTED VALUE THEN HE CLAIM CENVAT CREDIT.

[KASTURI SETHI]

Sh.Rajiv Khulbe Ji,

Notification No.8/14-ST dated 11.7.14 is not exclusively meant for Service Receiver as this notification imposes restrictions on SP to the extent that Cenvat Credit is not to be availed on inputs and capital goods by SP. Thus it relates to SP also.

(ii) In case SP avails abatement (60%) in terms of Notification No.26/12-ST as amended, SP will pay NIL ST and SR will pay 100% (Actually 40%) under RCM vide Notification No.30/12-ST as amended.(Serial no.7(a) refers].

(iii) In case SP does not avail abatement of 60%, ST is to be shared by both SP and SR. In other words, ST on 50% of value to be paid by SP and on 50% value by SR.(Notification No.10/14-ST dated 11.7.14) . In this situation, input service credit to be availed by SR is not to exceed 40% of ST paid. Though SR will pay 50%, yet SR cannot take credit of ST paid on 50% of value. (Notification No.8/14-ST dated 11.7.14)

(iv) Overall in both ways availment of input service credit should not exceed 40% value of ST as per Notification No.8/14-ST.

(v) In my view, Notification No.10/14-ST dated 11.7.14 clashes with Notification No.8/14-ST inasmuch as in the event of non-availment of abatement by SP, sharing of ST ratio has been changed to 50% ;50% from 60% ;40% between the two.Notification No.8/14-ST should have allowed input service credit up to 50% in the event of non-availment of abatement.

(v) Under RCM, first SR is to deposit ST in cash and there after will take credit.I

 

Thus reply to your cross query dated 27.8.16 is 'NO' for the first part and 'YES' for the second part.

[Ganeshan Kalyani]

Sir, the provision is not easy to interprete. However, to be precise to the query, in my view, the service tax paid by the querist on 40% of Value of service is an eligible credit. The auditor is not right in his first reply that the said notification is only for service provider. In his second reply he is correct, that if provider is private limited compnay, then, it will collect service tax and pay to the Government.

The service tax paid by recipient of service is eligible credit and can be availed based on the challab. Thanks.

AI Summary

Reverse charge on renting motorcab: recipient may claim cenvat credit for tax paid under reverse charge subject to statutory limits. Reverse charge liability for renting of motorcabs places tax on the recipient when the recipient is not in the same business; recipients who deposit tax under reverse charge may claim cenvat credit of the tax paid. Where the provider avails abatement the recipient pays on the abated value; where the provider does not avail abatement the tax may be shared between provider and recipient. Availability of input service credit is subject to a statutory ceiling and the interaction of abatement choices, producing limits on the quantum of credit the recipient may legitimately claim.