23 October 2013
Rule 2(I)of Cenvat Credit Rules 2004
" Service provided by way of renting of motor vehicle where such motor vehicle is not a capital goods are excluded from the definition of input service"
what does it imply? plz clarify with illustration.
23 October 2013
Any provider of output services can avail of CENVAT Credit on Input Services. What are Input Services? Input Services are services utilized by the Service Provider directly or indirectly to provide the service.
Amongst various input services are services of mobile telephone, photocoying, BSNL line & FAX, services of experts like lawyers, CAs, engineers and others, etc.
One of the common input service is hiring of a vehicle to appear in courts for hearings, visit clients' establishments etc. This hiring of a motor vehicle is Rent-a-Cab service. Obviously this service is an input service and if any ST is paid to the service provider then it should be eligible for CENVAT Input Credit.
With effect from 1st July 2012, in terms of Notification No 30/2012, Rent a Cab service was covered under Reverse Charge Mechanism and the service recipient is liable to pay the service charge on he same.
Rule 2(1) simply states that any person receiving the service of rent-a-cab cannot claim the payment of service tax thereon as an input service. In other words, any service tax paid for the service of rent-a-cab is purely expenses of the business and no input credit can be claimed on the tax so paid for utilization in payment of output service / product.
However, if the payment of service tax on rent-a-cab is capital goods then the service recipient can avail of the input credit. In other words, suppose the person hiring the mini-van or car or bus is a tour operator. For him this renting of cab is capital goods since without this motor vehicle he would not be able to render his output service of conducting tours. Hence for the tour operator as capital goods he can take the CENVAT credit in two instalments.
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