Ultilisation of cenvat for payment of service tax.

[Asked by Guest]

we are a authorized motor vehicle dealer.we purchase the vehicles from the manufacturer and sell it to customers.we also purchase equipments for our workshop.we are liable to pay service tax on the vehicles serviced.can we avil the cenvat credit to pay the service tax? in which manner?

[Surender Gupta]

The equipments you purchase for providing workshop services are eligble for cenvat credit.

[Madhukar N Hiregange]

Buying and selling of vehciles is not subjected to servcie tax. However VAT maybe applicable. NO credit on vehicles is admissible for this category. However equipments purchased for servicing are capital goods eligible for credit on the excise duty paid based on valid excise paying documents. The credit of CG would be available upto 50% in the year of receipt and balance in the subsequent years where the CG is still in possession.

The liability to pay service tax will be arise. Because we have already sale a vehicle and we have already charged vat at the time of sale. In my opinion, service tax will be charged at the time of serviced of the vehcile. However it may be charged when we are charged the cost of our services and it will not be charged at the time of free services.

AI Summary

Cenvat credit: workshop equipment eligible while vehicles are ineligible; credit spread between initial year and subsequent years.
Cenvat credit is available for workshop equipment treated as capital goods with valid excise documents, while no credit is admissible on vehicles sold as such; capital goods credit is utilisable over time with part allowed in the year of receipt and the balance in later years. Service tax liability arises when charging for repair or maintenance services and does not apply to vehicle sales or typically to free services, so Cenvat may be used to offset service tax on charged workshop services.