Cenvat Credit - Service Tax paid on Mediclaim

[Asked by Guest]

We are in a service Industry and we have provided Mediclaim Facility to our Employees in the Industry. We avail CENVAT credit on the Input Services. Now are we elegible to avail cenvat even on the Service Tax paid on Mediclaim which is charged by the Insurance Company?

As far as service provider is concerned, in terms of Rule 2(l) of CENVAT credit rules, any input service used in the course of activities relating to business is eligible for credit. Thus, the mediclaim facility for staff being the part of busines expenditure is eligible for CENVAT credit

Thanks for immediate opinion on this, but our doubt was in case if we avail and utilize and there is objection from the Department, then What Steps can be take for this? Are there any specific case laws for such Credits which will play major role. Reg..

[DEV KUMAR KOTHARI]

Employees ae engaged for providing services and incidental matters for such output services. Therefore, cost of employees is an input copst, their service is an input service, any incidental service obtained for engagement of such employees is also input service. Theefore, ST on mediclaim / personal accident insurance of employees, ST on telephones , transport, security, and similar services used for engagemetn of employees will be St on input service elgible for credit. Case law will help but before that factual position is to be established as to 'inoput service' and ST paid on such input service. If revenue disp[utes credit, one has to contest the claim. that may be considered as an essential part of life.

Sir, in the recent Seminar, this topic was discussed, where it was informed that Mediclaim is a Welfare Measure and it cannot be considered as business expense on Output service.

Mr Satish Kumar, you are correct, the view of the department is that it is a welfare measure and hence not eligible for Credit. But on strict interpretation of provision, it is an activity/expenditure related to business and hence should be eligible for credit as per Rule 2(l) of CCR,2004. Anyhow, issue will reach finality only thru a legal decision.

AI Summary

Cenvat credit eligibility for mediclaim service tax depends on whether the insurance is an input service used in business.
Whether service tax on employer provided mediclaim/personal accident insurance is eligible for Cenvat credit under Rule 2(l) hinges on whether the insurance is an input service used in the course of business. One position treats mediclaim as business related expenditure creditable as an input service; the department regards it as a welfare measure not eligible for credit. Establishing the factual character of the service as an input service is essential, and disputed denials must be legally contested with supporting case law where available.