Input Credit

[Indrajit Mondal]

Dear All,

We also paying telephone bills/insurance premium for car and machineries which also includes service tax can we claim the input credit against the output liability.

Please reply..

[Rajagopalan Ranganathan]

Sir,

Service tax paid on telephone charges can be availed as input tax provided the telephone is used in the course of your business. Service tax paid on insurance premium paid in respect of machinery can be availed since they are used in the manufacture of final product. As per rule 2 (a) (C) of Cenvat Credit Rules, 2004,

"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 skill.

If the motor vehicle possessed by you is for personal use of your employees or Directors etc., then you cannot avail the credit of service tax paid on insurance premium paid on such motor vehicles.

[Mr Rao]

Very rightly explained by Rajagopalji. I agree with him.

AI Summary

Input tax credit for service tax on telephones and machinery insurance allowed when used in business, but restricted for personal-use passenger vehicles. Service tax on telephone charges is admissible as input tax credit when the telephone is used in the course of business; service tax on insurance premiums for machinery used in manufacture is also eligible. However, credit for insurance on passenger motor vehicles is restricted under the Cenvat Credit Rules and is not available where the vehicle is for personal use by employees or directors.