One of my friend runs a 2 wheeler showroom (sales and service) in Pune.
He pays excise duty to the manufacturer while purchasing the vehicle as well as spare parts.
As he provide free+paid maintenance service to the customers, he charges service tax on labour charges.
Now, the question is, can he take CENVAT credit of the excise duty paid while purchasing the parts/vehicles and adjust the same against service tax payable.
As per my knowledge, he cannot take CENVAT credit of excise duty paid on purchase of vehicles, as the same is not being used in providing the output services.
But what about the spare parts he purchases? Can he take the CENVAT credit as it is being used for providing the output services?
You are absolutely correct that he can not take cenvat credit of excise duty paid on purchase of vehicle as the same is not being used in providing the output services.
Now your 2nd query about spare parts. In this regard, I tell you that if service tax is charged on gross amount of bill i.e. cost of goods as well as labour charges in their bill, they can take cenvat credit on spare parts used in repairing and servicing of vehicles. If they charge service tax only on labour charges and show sale of spare parts on which sales tax is charged and accounting of both type of transactions are maintained seprately, cenvat on excise paid on spare parts is not possible.
I, am thankful and really appreciate your quick response to my query.
One more thing I want to ask, while taking the CENVAT credit of service tax paid on rent, is he allowed to take full credit as the area of service center is approximately 1/2 of the whole premises? The remaining area is being used for sales activity only.
14 March 2013
YES, YOU CAN GET CENVAT CREDIT ON SERVICE TAX PAID ON RENT OF SERVICE CENTER PORTION. BUT IF TWO SEPARATE BILLS ARE POSSIBLE, THAT WILL BE MORE EFFECTIVE. IF IT IS NOT POSSIBLE, AT LEAST, BIFURCATION OF BOTH PORTIONS ARE NECESSARY ON THE SAME BILL FOR TRANSPARENCY AND FOR SATISFACTION TO THE SERVICE TAX AUTHORITIES. THANKS. Rajeev Kumar Garg (M.Com, L.L.B.) Consultant (Excise, Customs & Service Tax) Ph. no. +91 7500802402
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