Service tax credit on car repairing against excise duty, Service Tax

[HARDIK JANI]

Dear Sir,

It can be possible to take Cenvat credit, of Service tax paid for director's car repairing & insurance , against payment of excise duty? If possible then under which provision ?

Posts / Replies

[Rajagopalan Ranganathan]

Sir,

As per rule 2 (k) (D) of Cenvat Credit rules, 2004 motor vechicles are excluded from the definition of inputs. Hence you are not eligible to take credit of service tax paid for director's car repairing and insurance.

[YAGAY AND SUN]

There is specific denial on availment of CENVAT credit on Motor Vehicles except by some prescribed categories.

[Ganeshan Kalyani]

In my view there is nexus with the business. The director of the company needs travel to crack business deals, need to meet other business tycoons to develop business for which car is provided by the company. The company now a day has a concept called CTC which means the instalment of the car, petrol expense and it's maintenance is also included in the salary component of the director. The maintenance of the director's car is taken care by company. In my view if the car is maintained then how would the director of a company be able to discharge his duty. Thus there will be a impact indirectly on the progress of the company. The sale may come down as he will not be able to travel immediately when the meeting is fixed and hence has impact on production as well because if sale comes down then production too has to bring down. Hence the credit on the repair and maintenance of car of director is eligible to set off against excise duty liability.

However, litigation cannot be ruled out. Thanks.

[YAGAY AND SUN]

"Provided car is registered in the name of the Company".

[KASTURI SETHI]

Dear Querist,

It is relevant for you.

EXTRACT OF BUDGET CHANGES 2011-12

14.4 Similarly services relating to motor vehicle i.e. rent-a-cab, use of tangible goods, insurance or repair of vehicle shall not constitute an “input service‟ except in respect of output services where credit on motor vehicle is permitted as “capital goods”.