5% of value payable as Cenvat Credit Not taken

[NANDKUMAR SAGWEKAR]

Dear Sirs , w.e.f. 01/04/2011, the definition of exempted services includes services provided by taking abatement. In following two situations wheather 5%  of Value is required to paid ? 

01. ABC Constructions  a sole proprietor providing Commercial or Industrial Construction services to XYZ Ltd. ABC takes abatement of 67% of value of bill as per noti.No.1/2006 and satisfy all conditions mentioned there in. Can ABC is required to pay 5% of 67% abatement value, can ABC recover the same from XYZ Ltd.

02. XYZ Ltd , receives GTA services from various transporters and pay service tax after taking abatement of 75% as per noti.No.1/2006 , shall XYZ Ltd. has to pay 5% of 67 %      abatement value ?

All are requested to study my point and reply suitably

ANAND SHEMBEKAR

CELL NO 91-9421187122

[Snehal Kulkarni]

 

Dear Sir

Rule 6 of CCR 2004 talks about the obligation of manufacturer/ service provider who is providing both dutiable and exempted service.

Availment of Abatment doesnot means that you are providing the output service.

In both the cases cited above, you have to pay the Service Tat @10.3% and need not to reverse 5% of the abatment value.

The 5% reversal is requied in the case where the services having NIL Rate of Tax.

Also please note that this 5% reversal is not the Duty so CENVAT is not admissible to the buyer.

 

 

 

[NANDKUMAR SAGWEKAR]

Thank you very much Sir , I like to talk with you on Phone for few minutes can you give me your

number

Thanks

 

A M SHEMBEKAR

[NANDKUMAR SAGWEKAR]

So , if  service provider take abatement 67% , then he has to pay 5% of value of 67% ?

 

[Snehal Kulkarni]

Dear Mr Anand

 

 If you are taking the abatment of 67%, then you have to pay the STax 10.3% on 33%

 If you are taking the abatment of 75%, then you have to pay the STax 10.3% on 25%

5% Reversal of CENVAT is in the case where you are service provide of the Dutiable and Exempted service and No Seperate account is maintained for this.

Hope this is clear.

 

AI Summary

Cenvat reversal not required where abatement is taken; service tax due on the taxable portion instead.
Abatement of value does not equate to exempt supply and does not require the 5% reversal of CENVAT; service tax is payable on the non abated (taxable) portion. The 5% reversal applies only where a provider supplies both dutiable and exempt services and fails to maintain separate accounts for inputs/ input services used for exempt services, and such reversal is not treated as duty admissible as CENVAT for the recipient.