02 April 2009
I agree that as per Service Tax rules if Abatement is claimed, Cenvat Credit can not be availed.
However I have a genuine query, which I would like to clarify, with the following example-
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 (Reducing my Genuine Profit Margins)???
CAclubindia
