Service tax credit and applicability amount

[Vijay Chitte]

'A' contract with 'B' that, 'B' is providing a service in the fields of arrengemnt of travelling facility to 'A'. For that 'B' availed services from 'C' (Other travel agency) for hiring a Car/Motor car for providing service to 'A'. Now 'C' raise the bill to 'B' Rs.10490/- in the following manner. Gross Amount Rs.10000/- Service tax 4.9% Rs. 490/- ------------- Rs.10490/- ============= 'B' paid this amount to 'C'. And last B raise the bill to A including of his margne of Rs.1000/- in the follwing manner. Gross Amount Rs.11000/- (10000+1000) Service tax(12.24%) Rs. 1346/- ------------- Rs.12346/- ============== My Question:- 1)'B' acting as a Travel Agent for 'A' (service receipient)? 2) Can 'B' (Service provider)availe the 100% serivce tax credit which he paid to 'C' (Other travel agency)? If Yes, Any other obligation for 'B' (service provider)for availing service tax credit?

[Surender Gupta]

In this query, "B" is paying full service tax without availing any exemption, and assuming that the provisions of rule 6 of Cenvat Credit Rules, 2006 are not being attracted, I am of the opinion that you are eligible to avail 100% credit of Rs. 490/- paid by "C".

AI Summary

Service tax credit entitlement: intermediary may claim full input credit where no disallowance provisions apply. Where a travel intermediary has paid full service tax to a third party supplier and no exemption or disallowance provisions of the Cenvat Credit Rules apply, the intermediary is entitled to claim 100% credit of the service tax paid to that supplier; the advisory qualifies this entitlement by assuming the relevant disallowance provisions are not attracted and does not identify further obligations.