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 Vehicles as Capital Goods shall be allowed if:

a) Specified motor vehicles are purchased by Specified service providers

Or

b) Other motor vehicles are purchased by all service providers (including specific service providers)

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

a) Specified motor vehicles are provided to Specified service providers

Or

b) Other motor vehicles to all service providers (including specific service providers)

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

a) service against Specified motor vehicles are provided to Specified service providers and Manufacturer/Insurer

Or

b) service against Other motor vehicles are provided to all service providers (including specific service providers) and Manufacturer/Insurer 

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

Service

Explanation

Liability of Service Recipient

Liability of Service Provider

Effective Date

Renting of a  motor vehicle designed to carry passengers on abated value If service provider is not availing input credit

4.944%,i.e, (12.36%*40%)

Nil

1 July 2012

Renting of a  motor vehicle designed to carry passengers on non- abated value If service provider is availing input credit

4.944% (12.36%*40%)

7.416% (12.36%*60%)

1 July 2012

 Note 1If 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 2Abatement  available is 60%. 

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

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Category : Service Tax (3289)
Type : Articles (14965)

0 responses to “Allowability of CENVAT Credit on Purchase of Motor Vehicles”

  1. Rahul Kumar says:

    Can you please let me know the relevant circular or notification.

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