service tax on rent a cab service

[POOJA DAS]

Can we take credit of service tax paid on rent a cab service? In this case the cab is used by the comapany's directors (Construction company) for visiting the site of work...In need of your answer..Thank you.

[Mr Rao]

Dear concerned,

No, you cannot take credit of service tax paid on rent-a-cab service. Rule 2 (l) B of Cenvat credit Rules, 2004 excludes the 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 from the ambit of input service tax credit.

[Rajagopalan Ranganathan]

Madam.

As per rule 2 (l) (B) "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.

As per rule 2 (A) (viii) capital goods means ^" motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis, but including dumpers and tipper

used-

(1) in the factory of the manufacturer of the final products; or

(1A) outside the factory of the manufacturer of the final products for generation of electricity or for pumping of water] for captive use within the factory; or

(2) for providing output service;

(B) motor vehicle designed for transportation of goods including their chassis registered in the name of the service provider, when used for-

(i) providing an output service of renting of such motor vehicle; or

(ii) transportation of inputs and capital goods used for providing an output service; or

(iii) providing an output service of courier agency

(C) motor vehicle designed to carry passengers including their chassis, registered in the name of the provider of service, when used for providing output service of-

(i) transportation of passengers; or

(ii) renting of such motor vehicle; or

(iii) imparting motor driving skills.

Except in the abovecases motor vehicle/motor cab cannot be treated as capital goods and cenvat duty paid on such motor vehicle/motor cab cannot be availed as credit. In your case since the motor vehicle is used by your directors for visiting the site and motor vehicle used for such purpose cannot be treated as capital goods as per above definition.

AI Summary

Input tax credit on rent-a-cab services denied when the rented vehicle does not qualify as capital goods under credit rules. Service tax credit for rent-a-cab services is disallowed where the rented motor vehicle does not qualify as capital goods under the Cenvat Credit Rules. Rule 2(l)(B) excludes renting-of-motor-vehicle services from input credit unless the vehicle falls within specified capital-goods exceptions (use in manufacturing, captive power/pumping, provision of output services, goods transportation for output services, passenger transportation/renting/driving instruction). Vehicles used for directors' site visits do not meet these exceptions and therefore do not confer credit entitlement.