Tax Management India. Com TMI - Tax Management India. Com
Case Laws Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Manuals Articles SMS News Highlights
Article Section
Home Articles Service Tax Pradeep Jain
← Previous Next →

Availment of Cenvat credit in case of Abatement

Submit New Article
Availment of Cenvat credit in case of Abatement
By: Pradeep Jain
March 17, 2012
  • Contents

Prepared By:

CA Preeti Parihar

Ankit Palgauta


There are a no. of cases where the service provider also supply the material alongwith the services. In such cases, consideration received by him is inclusive of value paid for goods. Since the service tax is leviable on the service component, value of goods should not be included in the assessable value. Government had prescribed Notification no. 01/2006 ST dated 1.3.2006 wherein abatement at the prescribed rates was allowed in respect of services specified there under. However, in case of abatements, Cenvat credit cannot be availed.

The service providers opting for the abatement scheme also avail the input services on which service tax is paid. Since they are not able to take the credit of the same, the value of input service tax ultimately forms the part of taxable value on which again the service tax is charged by the service provider. Thus, cascading effect exists due to tax paid input services in the cases where the abatement is opted. This is common in case of services like Convention center or mandap with catering, Pandal or Shamiana with catering, Coastal shipping, Accommodation in hotel, Railways goods, Railways passengers, construction etc. We had also prepared an article namely “Abatement Scheme – Defeating cascading theory” which was published on a leading website of taxation.

Now, in the Budget 2012, Government has introduced abatement rates for various services wherein Cenvat credit of input services is allowed. In some cases, credit of even capital goods and inputs is also allowed. These services are listed as follows:-


S. no.

Description of service

Credit allowed


Convention center or mandap with catering


All credits except on inputs, of chapter 1 to 22 are allowed


Pandal or Shamiana with catering



Accommodation in hotel etc

Input services


Railways goods


All credits are allowed– inputs, capital goods and input services


Railways passengers


Thus, this is a welcome step by the Government. However, the Government has introduced Cenvat facility for selected services, not on all services which have same problem. For example, in Construction services, the credit of service tax paid on input services availed from a sub- contractor by the main contractor is not allowed. This is the example of one service and there are many such services. Thus, the problem still exists in the system and these are to be rectified soon by maintaining the equity on similar-natured services.




By: Pradeep Jain - March 17, 2012


Discussions to this article


I do agree with the last para of the article that such facilities should be extended to various other such services also.

However, it is required to be seen if the benefit provided herein by the Government by introducing Cenvat facility for selected services; are passed on to the customers by such service providers in the form of reduction in the final value charged for their services.

The article is explained in a very simple and understanding language.

By: Naveed S
Dated: 18/03/2012


← Previous Next →
Discussion Forum
what is new what is new

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || ||

© [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version