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

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.