Service tax credit on mobile phones

[Guest]

Our client has taken mobile phone connections for its employees under corporate connection policy. The bills are in the name of the employee. Our client is bearing mobile phone charges. Can our client claim Cenvat Credit in respect of service tax paid on mobile phone charges?

[Surender Gupta]

As per the provisions of rule 2(l) of the Cenvat Credit Rules, 2004, any input service which is used to provide output service is eligible for Cenvat Credit. Therefore, the heavy onus is on the company to prove that the mobile phone provided to its employees are for the purpose of its business and used for providing output service.

[Madhukar N Hiregange]

This is a common practice and my view is that credit may not be deniable of the same is used for pofficial purposes. It maybe wise to avail the credit after a deduction for personal use ( say 10-30%) depending on the personal use on approxiate basis.

AI Summary

Cenvat credit on employee mobile bills may be claimed where business use is proven, with personal use apportioned. The central point is that Cenvat Credit under rule 2(l) of the Cenvat Credit Rules, 2004 is available for an input service (mobile phone service) if it is used to provide an output service; the company must prove business use. In practice credit is often claimed where usage is official, but a prudent approach is to apportion and deny a reasonable percentage for personal use before availing credit.