Allowability of CENVAT Credit on Purchase of Motor Vehicles

CA Nishant Gambhir

It has always been a matter of discussion regarding Cenvat Credit availability on purchase/hiring of Motor Vehicles. It was provided that Cenvat Credit w.r.t. certain specified motor vehicles shall be made available to only certain specified service providers. The same is discussed as below.

Following has been considered as Specified Motor Vehicles (including their bodies):

Buses, Motorcycles, Cars & Cabs, Trucks & Lorries.

And following are the specific service providers:

Rent-a-Cab Service, Outdoor Caterer Service, Transport of Goods by Road, Tour Courier Service, Tour Operator Service, Cargo Handling Service, Pandal or Shamiana Service.

It was further provided that:

1.CENVAT CREDIT of Motor Vehiclesas Capital Goodsshall be allowed if:

a)Specifiedmotor vehicles are purchasedbySpecifiedservice providers

Or

b)Othermotor vehicles are purchasedby allservice providers (including specific service providers)

2.CENVAT CREDIT of Motor Vehicles i.r.t. ‘Rent a Cab/Hire Service’as Input Serviceshall be allowed if:

a)Specifiedmotor vehicles are providedtoSpecifiedservice providers

Or

b)Othermotor vehiclesto allservice providers (including specific service providers)

3.CENVAT CREDIT of Motor Vehicles i.r.t. ‘Repair/Insurance Service’as Input Serviceshall be allowed if:

a)service againstSpecifiedmotor vehicles are providedtoSpecifiedservice providersand Manufacturer/Insurer

Or

b) service againstOthermotor vehicles are providedto allservice providers (including specific service providers)and Manufacturer/Insurer

Below are the service tax rates applicable under 2 cases for ‘Rent a cab/hire’ service:

Note 1:If service provider does not charge service tax in invoice and he is not registered under service tax i.e. ST No. not quoted in invoice, then it can be assumed that he is not availing Input Credit.

Note 2:Abatement available is 60%.

(You may reach the person at canishantgambhir@gmail.com)