Cenvat Credit in respect of Input services

[Guest]

A person who is registered with service tax and rendering taxable services and Trading of goods ( liable to VAT / sales Tax ) , can claim the CENVAT credit in respect of insurance charges , telephone services, hiring of car, etc using both for trading and services etc. 2. Whether CENVAT credit is available on cellular phone , both for prepaid and post paid? If yes, under which circular

[Surender Gupta]

All the services mentioned in the query are eligible for Cenvat Credit for availing Cenvat Credit. For availing Cenvat Credit on Mobile Phone, provisions of Cenvat Credit Rules, 2004 are sufficient.

[Madhukar N Hiregange]

Since this assessee is also provding servcies which are not taxable ( trading) the restriction in Rule 6 of 20% of output tax would in my opinion attract. On cell phones used for office purposes the credit is available under the defintion of input servcies itself. No circular exists.

[Guest]

There should be a direct relation between the input service and the output service or goods on which service tax / CENVAT is paid. If you have a Cyber Cafe and use a dial up connection, the ISP Charge and Telephone Line charge is an input and sevice Tax on these inputs can be set off. You cannot set office office telephone bills service tax on your output service as it has no relation. However, if you have to deliver an output service through fax or internet, whatever service tax you prove is for delivering this output service should be rightfully allowed to you. However, even in the department no 2 officers will be consistent with each other. By law they have to be most favourable to assessees but in practice they are revenue centric and will scream substance over form or form over substance, whichever way the revenue is higher.

AI Summary

Cenvat credit on input services allowed when inputs directly support taxable output, subject to apportionment for non taxable use. Cenvat credit is available on business input services such as insurance, telephone, vehicle hire and mobile services under the Cenvat Credit Rules, 2004, provided there is a direct nexus between the input service and the taxable output; where non-taxable outputs exist, an apportionment limitation reduces admissible credit and claimants must substantiate use of inputs in delivering taxable services.