Cenvat credit

This query is : Resolved

Ashish Singhal (Querist)
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10 April 2016 How much cenvat credit can be availed by the person who provide motor vehicle on rent and take the same services from another service providers

Shilpi

Shilpi (Expert)
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11 April 2016 w.e.f. 1.7.2012, renting of motor vehicle service w.r.t. vehicles that are not capital goods is NOT available as input credit.
Further the duty paid on the purchase of the motor vehicle would be available as credit of capital goods for the person using the capital goods in providing such output service.

Ashish Singhal

Ashish Singhal (Querist)
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12 April 2016 But what about the service received by him

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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19 July 2024 In the context of availing CENVAT credit for services received and provided by a person who rents out motor vehicles, the following points should be considered:

### Availing CENVAT Credit for Input Services

1. **Input Services:** If the person is providing motor vehicles on rent, they may incur various input services that are directly or indirectly related to the business operations. These can include:
- Repair and maintenance services for vehicles.
- Insurance services.
- Services related to management, such as fleet management services.
- Services related to the operation and maintenance of rented premises or offices.
- Services related to advertising and promotion of rental services.
- Any other services that are used for providing the output service of renting motor vehicles.

2. **Conditions for Availing CENVAT Credit:** To avail CENVAT credit on input services, the following conditions generally need to be met:
- The input service should be used in or in relation to the manufacture of final products (in case of goods) or provision of output services (in case of services).
- The service provider should have documentary evidence like invoices and bills for availing credit.

3. **Proportionate Credit:** If the person also avails services (input services) from another service provider, such as renting premises, receiving advertisement services, etc., they can claim CENVAT credit on the service tax paid for those input services. The credit can be availed based on the proportion of these services used in providing taxable services (renting motor vehicles).

4. **Documentation:** Proper documentation is essential to claim CENVAT credit. This includes maintaining invoices and bills showing service tax paid on input services received. The invoices should clearly indicate the service tax amount and details of services provided.

### Examples of Input Services and CENVAT Credit

- **Repair and Maintenance:** If the motor vehicles rented out require repair and maintenance services, the service provider can claim CENVAT credit on the service tax paid for these services.

- **Insurance Services:** Insurance services related to the motor vehicles rented out can also qualify for CENVAT credit.

- **Advertising and Promotion:** Expenses related to advertising and promotion of rental services, if services are received from another service provider, can also be claimed for CENVAT credit.

### Conclusion

The person renting out motor vehicles can avail CENVAT credit on input services used in relation to providing the rental services, subject to fulfilling the conditions specified under the CENVAT Credit Rules, 2004. It's advisable to consult with a tax expert or Chartered Accountant to ensure compliance with specific rules and to optimize the utilization of CENVAT credit effectively.