Cenvat credit - Travelling agent services

[Vijay Chitte]

'A' (Travel agent) availed service from 'B' (Other travel agency)for providing service to his client 'C'. 'B' (other travel agency)raised the bill to 'A' for Rs.10490/- [10000 + 490 (S.T. 4.9%)]. 'B' paid this bill in time. Now 'A' raise the said bill to 'C' including his profit margine Rs.1000 e.i Rs.11000 (10000+ +1000). My question is: Can 'B' charge the service tax @4.9%(After taking abatment)OR @12.24%? If, he can charge the service tax @4.9%, Can he take the CENVAT credit which aviled from 'B'?

[Surender Gupta]

In the notification no. 1/2006 it clearly prohibited to avail the two benefits simultaneously. You have to choose either to avail the exemption (abatement) or to pay full service tax. If you want to pay at concessional rate, cenvat credit is not available.

AI Summary

Cenvat credit restriction prevents claiming abatement and input credit simultaneously, requiring an exclusive choice of benefit. Cenvat credit and abatement for travel agent services are mutually exclusive: a supplier must choose either the concessional abatement or full service tax treatment, and opting for the abatement disallows claiming CENVAT credit while paying full service tax preserves eligibility for input credit.