01 April 2009
I'm a Tour Operator & Travel Agent based at Agra. I get my Domestic & International Ticketis issued by an IATA Agent in Delhi. For which my associate agent in Delhi issue Invoice in favour of my company, and charge Service Tax @ 0.6% on Basic Fare (in case of Domestic Tickets and @ 1.2% on basic fare (in case of Int'l air tickets).
I also issue my Invoice for the same ticket to hand over to my clients and charge the same rate of service Tax (as by my associate agent in Delhi.
Means, I charge the same amount of Service Tax, which I have already paid to my Associate Agent in Delhi (who is issuing tickets for my clients).
So my question is that-
1.Would I be entitled for Cenvat Credit of the Service Tax/ Cess, which I have already paid to my Agent in Delhi??
2. If I'm entitled for Cenvat Credit, should I not pay any Service Tax/ Cess (locally in Agra) for the tickets issued thru my agent in Delhi.
3. I came to know that if one claims Abatement, he is not entitled for Cenvat Credit. As I'm charging my clients @ 0.6% and 1.2% on the basic fare of tickets (means I have claimed the Abatement), will I be entitled for Cenvat Credit??
4. If I'm not entitled for Cenvat Credit, I would be paying DOUBLE Service Tax/ Cess (1. to my Agent in Delhi & 2. in Agra locally), where as I'm charging the Service Tax from the client only for one time.
Paying the service tax/ cess for the second time (locally in Agra) would reduce our profits. IS IT JUSTIFIED??
01 April 2009
When any abatement or concession is enjoyed, the cenvat provisions are ruled out, as the intention of the government is not to pass on the double benifit, but reduce double taxation.
This is the only reason this services enjoys the lowest service tax under the statute.
I am sure you will agree on the subject concession.
01 April 2009
Thanks for your reply. But I still have some doubts, which are as follows-
I agree that as per rules if Abatement is claimed, Cenvat Credit can not be availed.
I have an example to clarify my query-
Suppose I provide a Tour Package worth Rs. 1 Lac, for which I charge my clients Service Tax/ Cess @ 2.58% of the Package Value (Rs. 2580/-). (Means my total Invoice Amount is Rs. 102,580)
Now, I take some of the Ground Services from my Sub Agent (worth Rs. 50,000/-), for which he issues an Invoice in favour of our company and charges Service Tax/ Cess @ 2.58% of the value of Service provided (in this case- Rs. 1290/-).
Now my question is that I have charged my client Rs. 2580 as Service Tax/ Cess. Out of which I have already paid Rs. 1290/- to my Sub Agent as Service Tax/ Cess.
So the remaining amount of Service Tax/ Cess with me is only Rs. 1290/-.
Now as per your reply, because I have claimed the Abatement, I should pay the full amount of Rs. 2580 as Service Tax/ Cess (whereas I'm left with only Rs. 1290).
SO SHOULD I PAY RS. 1290/- OUT OF MY OWN POCKET ???
02 April 2009
Since you are clear on the aspect that Cenvat Input Credit in not available when any abatement is enjoyed, there is no question to reiterate the applicability in your case.
Coming to paying out of your own pocket, you as a service provider are charging service tax, collecting it from your client and paying it to the government.
The only cost that comes to you is the service tax paid against your expenses.
And this cost for all purposes is part of your business expenses.
We do not foresee any cost coming to your account as you act as a mediator to collect service tax from your client and depositing with the authorities.
And yes the Rs. 1290/- will have to be absorbed as your business expense
CAclubindia
