TMI BlogCENVAT credit on rent-a-cab hidden ambiguity that may allow credit despite of other restrictionsX X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT credit on rent-a-cab hidden ambiguity that may allow credit despite of other restrictions - By: - Venkata prasad Pasupuleti - Cenvat Credit - Dated:- 15-9-2016 - - CENVAT credit on rent-a-cab hidden ambiguity that may allow credit despite of other restrictions CA Venkata Prasad Denying of CENVAT credit on service of rent-a-cab is favourite to revenue officers. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period upto 01.04.2011, courts/tribunals allowed the credit however with advent of specific exclusion in the definition of Input service so as to disallow the credit on rent-a-cab services, most of the assessee s became ineligible for the credit from the year 2011 onwards. The relevant part of input service definition reads as under: (B) services provided by way of renting of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods Thus the eligibility is linked with definition of capital goods and in short, credit of rent-a-cab is eligible if the cab is capital goods. And the relevant parts of capital goods definition reads as under (as relevant to cab/motor vehicle): (C) Motor vehicle designed to carry passengers i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding their chassis, registered in the name of the provider of service , when used for providing output service of - (i) Transportation of passengers; or (ii) Renting of such motor vehicle; or (iii) Imparting motor driving skills; As seen from the above, to treat cab (motor vehicle that transports passengers/persons) as capital goods, there are twin conditions to be met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cab should be used for provision of specified services it should be registered in the name of service provider On reading of CG def, it is clear that if the vehicle is registered used for provision of specified services then cab is CG in all other cases it is not CG , which gives impression that manufactures will never get credit of excise duty paid on such passenger motor veh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle even if they used solely for factory. Further in case vehicle was taken on financial lease basis and vehicle is registered in the name of financier then even vehicle is used for providing specified services, it will be not be a CG in the hands of assessee owing to mandate of registration in the name of service provider in the CG def. Hence duty paid on such financed vehicle become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cost may require to be factored in lease instalments. As stated supra the IS def was linked to CG def which leaves impression that credit of service tax paid on cab rentals charges will be eligible if the cabs are CG but there seems to be some anomalies here as the definitions of IS CG were not synchronized properly. One of condition to treat cab/vehicle as CG is that it shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be registered in the name of service provider . The question now arises is that vehicle can be registered in the name of service provider only if he is the owner and once he owns it then what is the need of taking the vehicle on rent basis?. One can say this should be construed to mean that if the same person (who is taking vehicle on hire) purchases vehicle and eligible to take of credit as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CG then services of cab rentals also eligible. But mandate of registering the vehicle in the name of service provider would block this interpretation since such registration is inescapable condition for deciding the eligibility as CG . However it may be viewed that condition of registration shall be limited only in the context of taking CG credit said condition may be ignored while det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining the eligibility of IS . Going by this view, credit may not eligible except to the service providers specified therein. However there is other plausible view is that the eligibility of CG (including registration) shall be seen in the hands of person providing the service of cab rental and not in the hands of person receiving the service. If this interpretation is adopted, most o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee s (including manufactures) would get the credit. Here assessee should check every time whether vehicle registration was in the name of his vendor. With the above possible contrary views, still there are possibilities of getting CENVAT credit on rent-a-cab service even after 2011 amendment. With a view not to loose the credit especially due to one year time limit, it is advisable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avail credit initially reverse it under protest with intimation to department. After expiry of certain period, same can be availed back. (For any feedback/queries mail to venkataprasad@hiregange.com ) - Reply By Ganeshan Kalyani as = Good article. Dated: 15-9-2016 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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