Sorabh Gupta (Manager ( Taxation )) (877 Points)
26 October 2009Dear All
Can any body tell me that whether service tax credit is allowed on the mobile reimbursement to employee.
For example, if company reimburse 1000 Rs. per month to a employee , whether servie tax credit is allowed ,
If yes the please attach any such clarification OR notification by deptt.
CA Suri Kota
(Assistant Manager @ EY)
(955 Points)
Replied 26 October 2009
I don't think ..the company can claim the credit as in Company's point of view, it jus reimbrsing the expenses incurred by its employee ( What ever form it may be). As the company has not directly incurred the telephone expenditure , It can not claim the credit of service tax on such payments.
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 26 October 2009
already an opinion is given by Mr Madhukar H.Hiregange on the same.Yes the very purpose for giving mobile phone is for business nature atleast 90% credit will be given and the tribunal may disallow 10% being personal in nature.I think some circular is also is issued in this regard
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 26 October 2009
There is a contrary view which I wish to put forward.
In todays world employees are provided mobiles by companies to ensure that they are reachable at any time by the company / cusotmers/ suppliers. Otherwise why should they provide the same. It is certainly not for making personal calls which would take away an employees time.
On the above argument there would eb a good case to say that majoirty of the calls made would be for the business.
It maybe prudent to avail credit on say 90% of the same stating that the balance is personal. In my view the tribunal would look at the same favourably especially when a part is not being availed.
Sorabh Gupta
(Manager ( Taxation ))
(877 Points)
Replied 26 October 2009
Sivaraman
Thanks for giving ur opinion but i just need some circular issued by deppt.........
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 26 October 2009
I will let you know but give me a days time for me to check and comment on the same
Sunil
(Trader)
(2611 Points)
Replied 26 October 2009
Service Tax Credit is allowed only on land lines used for the business including on the internet through such land lines (dial up or broadband). This was what the separtment was allowing when they started giving the benefit of input and that too the phone had to be in the premises from where the service is given and in the bill should be in the name of the assessee. Many BPOs and IT service providers use broadband of Triband by MTNL or Dataone of BSNL. This is both internet and phone.
However, nowadays you get data cards on reliance and photon etc. There are many places in India that do not have wired phone lines to give internet. maybe if they can prove the business usage for such data cards and they receive the bill and it runs in the same premises from where they provide their service, they should be able to justify taking input on such mobile internet.
However, it will be difficult to prove input on the service for mobiles provided to the employees. I do not think it is worth taking the risk as the service would not have a proper nexus with the output service or goods.
CA Suri Kota
(Assistant Manager @ EY)
(955 Points)
Replied 26 October 2009
Hi. ....This may resolve the query.....................
https://www.allindiantaxes.com/ait-news-119.php
Service Tax Credit on Mobile Phone Bill allowed:
The Circular No.97 allows Credit on Mobile Phone service and clarifies as under:
“A doubt has been raised regarding admissibility of CENVAT credit on service tax paid in respect of mobile phones. In the Service Tax Credit Rules, 2002, it was prescribed that credit of service tax was admissible only on telephone connection installed in the business premises. A clarification to this effect was also issued vide circular No. 59/8/2003-ST, dated 20.6.2003, in the context of the Service Tax Credit Rules, 2002. However, in the CENVAT Credit Rules, 2004 no such condition has been prescribed. Therefore, w.e.f. 10.9.2004, credit of service tax paid in respect of mobile telephone service is admissible, provided the mobile phone is used for providing output service or used in or in relation to manufacture of finished goods”.
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 26 October 2009
Thanks Mr Suri Kota for providing the circular contents on the same.the vague part again is mobile phone used in relation to output service or used in or relation to manufactured goods..even though input output correlation has been done away with nexus should always be there .Now the question is whether mobile phones used by HR dept is also eligible for cenvat credit ? let experts like you and others continue the discussion on the same
CA Suri Kota
(Assistant Manager @ EY)
(955 Points)
Replied 26 October 2009
Most welcome................
Sunil
(Trader)
(2611 Points)
Replied 26 October 2009
Please also note that mobile should be in the name of the assessee. It would be if the subscriber is the assessee and he gives the mobile to the employee.If he reimburses to the employee the cost of mobile belonging to the employee, it will be very hard to prove the nexus with output service.
CAclubindia
