Input service credit - Reg.

[vinay wakde]

We have hired Air Craft on rental basis for traveling purposes exclusively for the Directors of our company at various places for business purposes.  Kindly let us know whether we are eligible for taking CENVAT credit  on said   input service or credit shall be denied by the Department.    

Regards,

VINAY

 

[Vivek Harsh]

Rule 2[(l) “input service” means any service, -

            (i) used by a provider of taxable service for providing an output service; or

            (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,

If input service is for purpose of providing output service credit may be allowed but i doubt the levibility of service tax when provided on rental basis

[Mahir S]

If it is proved that the air craft are hired for business purpose, then service tax credit can be availed.

Can you please specify under which category the services are provided by the air craft agency and whether any agreement/contract is made for such rental basis or otherwise.....

[vinay wakde]

We have entered with an agreement with Air Craft service provider & paying minimum Rent of Rs. 30,000/- P.M. In case, the Air Craft is used more than extra rent is paid.

Regards, VINAY

 

 

[Mahir S]

I am of the opinion that such service tax credit can be availed.

Just ensure that in the agreement with the Air Craft service provider, the words -" for use by the Directors in relation to business work..."are included therein.

AI Summary

Input service credit may be allowed for rented aircraft used for directors' business travel if agreement evidences business use. CENVAT/input service credit for rented aircraft hinges on qualification as an input service under Rule 2(l): use in providing an output service or in relation to manufacture/clearance. If the aircraft is used for demonstrable business purposes, credit may be available. Contractual evidence that the service is for directors' business use is necessary, and uncertainty over whether the rental attracts service tax may affect entitlement.