Cenvat credit for the services rendered in hotel

[Guest]

we are in the business of hotel. we offer services like room on rent,sale in restaurant & bar,banquet with food,beauty parlor,rent a cab etc.we have common input services which can not be identified with output sevices/sale in restaurant.we are claiming abatement in banquet with food catering.how can we claim the cenvat credit? as in my opinion if we go for Rule 6(3)C i.e.20% cap,i think restaurant sale is not Exempted service and also we can not take credit of input services in case we take abatement benifit asin case of banquet with food.

Just guide me.

[Madhukar N Hiregange]

Dear Poonam, Input service tax credit is available when multiple servcies ( taxable and non taxable) are provided also. The utilisation would be restricted to 20% of the output tax. Where abatements are claimed and if the same is under i/2006 then no input service credits would be available for SUCH services.

[Surender Gupta]

In your case, you are not entitled to claim any credit for the purpose of payment of Service tax on food catering since abatement is being claim. But, for the other services for which you are not claiming abatement, common input services are eligible for Cenvat Credit in terms of Rule 6(3) subject to limit of 20% of service tax payable and in terms of Rule 6(5) 100% credit on 16 services. I think by adopting a dynamic method like this, you would gain maximum gain of Cenvat Credit.

AI Summary

Hotel Seeks Cenvat Credit for Room Rentals, Restaurant Sales; Faces Challenges with Input Service Identification Under Rule 6(3) and 6(5) A hotel business inquired about claiming Cenvat credit for services like room rentals, restaurant sales, and banquet catering. They face challenges in identifying common input services with specific outputs and are claiming abatement for banquet catering. One expert advised that input service tax credit is available for both taxable and non-taxable services, but utilization is capped at 20% of the output tax. Another expert noted that credit cannot be claimed for food catering services with abatement, but for other services without abatement, common input services can qualify for Cenvat Credit under Rule 6(3), with certain services eligible for 100% credit under Rule 6(5).