Cenvat credit for shortterm accomodation

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Querist : Anonymous

Querist : Anonymous (Querist)

11 May 2015 Our company is stock broking company . we are booking hotel for staying of managerial person for the purpose of business meeting.Hotel raising the invoice in the name of our company along with service tax. Can we take the CREDIT of service tax under CENVAT rule ? Please suggest ..

Vishrut Shah

Vishrut Shah (Expert)
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12 May 2015 No Cenvat credit can not be claimed as said service can not be classified as eligible input Services.

Querist : Anonymous

Querist : Anonymous (Querist)

12 May 2015 Hi Vishrut,

Could you please refer me the rule and circular for above queries. As per definition of input service under CENVAT rule as below:

Definition of ‘input service’ has been changed w.e.f. 1-4-2011. The new definition is significantly different from the earlier definition of ‘input service’.

Rule 2(l) of Cenvat Credit Rules (as effective from 1-4-2011), defines ‘input service’ as follows –

“Input service” means any service, -

(i) used by a provider of taxable service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,

and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

but excludes services, -

(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for- (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or

(B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or

(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee.

Its a inclusive definition. in other words it has not excluded the short term accommodation from the definition.

Vishrut Shah

Vishrut Shah (Expert)
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12 May 2015 As you have correctly mentioned above the definition is exhaustive and not inclusive which leave open window for litigation which always drive on fact and stands taken by judicial systems.

Cenvat Credit Rules primarily based on availability of credit of services which are used for providing output services directly or indirectly.

As per the various pronouncement of judiciary and clarified by the Department at different intervals any services which do not contribute directly for generation of output services, cenvat credit of tax paid is always denied.

In your case it is clearly visible that you are into business of Stock Broking for which a nexus can never be established for hotel services used as short terms accommodation and it will be always a matter of judiciary dispute.

So in order to avoid any disputes at later date it will be tax prudence not to take credit of the said services.

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