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Need your advice

Surendar (Head of Accounts) (241 Points)

10 October 2012

Friends,

Rent cab services has been covered under Reverse charge provision w.e.f. July'12. Please clarify whether input tax credit can be claimed on tax paid on such services. I am told that credit cannot be claimed on such services but I doubt the veracity of that statement. Please confirm me at the earliest with relevant provision/notification.

Thank you

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5 Replies

Arun Kumar Singh (GST Advocate) (15220 Points)
Replied 10 October 2012

You can take cenvat credit of duty paid on reverse charge system.

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CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 10 October 2012

2.0 AMENDMENT IN DEFINITION OF INPUT SERVICES WITH RESPECT TO MOTOR VEHICLE RELATED SERVICES

2.1 Prior to 01/04/2012, following services, if used for Motor Vehicles, were specifically excluded from the definition of input services:

(i) Rent a CAB Scheme Operator Services;

(ii) Supply of Tangible goods Services;

(iii) General Insurance Service;

(iv) Service station services (i.e. Repair, Reconditioning or restoration of Motor vehicle);

However, credit was available for those service providers for whom credit on Motor Vehicles was considered as capital goods as per the definition of capital goods as provided in Rule 2(a) of CENVAT Credit Rules,2004.

2.2 With effect from 01/04/12, CENVAT Credit in respect of four above mentioned taxable categories, if used for Motor Vehicle, shall be available only in following circumstances:

1. For “Rent a Cab Services” and “Supply of Tangible goods Services”: CENVAT Credit Credit shall be available only when motor vehicle received on rent/hiring through “Rent a Cab Services” or/and “Supply of tangible goods Services” is a capital goods for the person receiving such services.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 10 October 2012

yes, cenvat credit of input service tax paid on rent a cab service , whether direct or reverse charge, is available only if motor vehicle is a capital asset.

Regards,

CA Pooja Agarwal (Chartered Accountant) (3228 Points)
Replied 10 October 2012

. CENVAT credit on motor vehicles and components, parts and accessories of motor vehicles (Notfn.18/2012 – CE-NT Dt.17.03.12:. Motor vehicles other than those falling under tariff headings 8702, 8703, 8704 and 8711 and their chasis are included in the definition of capital goods. Therefore, CENVAT credit is permitted on motor vehicles used in the factory of the manufacturer of final products or service providers for rendering services. Components, parts and accessories of the motor vehicles are also eligible for CENVAT credit.

. Motor vehicles excluded are – Motor vehicle for transport of persons (8702), Motor cars and other motor vehicles principally designed for transport of persons (8703),

Motor vehicles for transport of goods (8704), Motor cycles and mopeds (8711). These motor vehicles registered in the name of service provider for providing specified services like tour operator, rent-a-cab service etc., continue to be eligible for CENVAT credit.

(Guest)

As per the Reverse charge machanism, Revised

Renting a passanger moter vehicle with abaited value 100% of the service tax liability should be payable by service tax recipient,

withought abetment , 60% is the liability of service provider and 40% is the liability of service recipient.

abetment (Standerd deduction value) is 40%

Now if there is abetment 100% of the service tax liability is of service recipient and liable to pay to the goverment account.

If withought abetment 60% of the service tax liability is of the service provider that he is liable to collect and paid to the goverment which he will lavy in his bill that much credit you can take. and rest of 40% is the Recipient liability.

thanks