Cenvat of input services in restaurant business

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Deepak (Querist)
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13 January 2014 Dear Freinds,

We are into Restaurant Business, we usually take credits of all the services received like, professional fees, telephone, consultancy, office internet, etc against the monthly payment of servece tax collected from guest with the abatement of 60% i.e., 12.36*40% = 4.944%, we collect from the guest.

My question is recently our Import got stuck with customs and they had charged us Detention and Demmurage charges, whether we can take input tax credit of service tax paid on these charges ?

Also, can we avail the credit of Import duty and Excise duty paid during the month on the purchases.

Please reply.

Regards,

Deepak Gangwani

Deepak

Deepak (Querist)
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28 January 2014 Can anyone know the answer ?

Deepak

Deepak (Querist)
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28 January 2014 Can anyone know the answer ?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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19 July 2024 In the context of your restaurant business, let's address each aspect of Cenvat credit eligibility for different types of services and charges:

### 1. Detention and Demurrage Charges:

Detention and demurrage charges are typically incurred when goods imported via sea or air freight are held beyond the allowed free time at the port or airport. These charges are directly related to the import of goods and can be considered as part of the input services used in the course of business operations.

- **Eligibility for Cenvat Credit**: According to Rule 2(l) of the Cenvat Credit Rules, 2004, "input service" includes services used by a provider of taxable service for providing an output service. Since detention and demurrage charges are directly related to the import of goods, they can be considered as input services.

- **Conditions for Availing Credit**: To claim Cenvat credit on detention and demurrage charges:
- Ensure that the service tax charged by the customs authorities on these charges is paid to the government.
- Maintain proper documentation, including invoices and proof of payment, which clearly show the nature of services provided (detention and demurrage charges) and the service tax paid.

### 2. Import Duty and Excise Duty:

- **Import Duty**: Import duty is a customs duty charged on goods imported into the country. It is not eligible for Cenvat credit under the current Cenvat Credit Rules. Import duty forms part of the cost of goods imported and is not considered an input service.

- **Excise Duty**: Excise duty paid on goods purchased domestically is eligible for Cenvat credit if those goods are used in the manufacture of taxable goods. However, in the context of a restaurant business, which typically involves the sale of prepared food and beverages, the applicability of excise duty credit may be limited unless specific goods subject to excise duty are used in the business operations.

### Conclusion:

- **Detention and Demurrage Charges**: Yes, you can claim Cenvat credit on service tax paid on detention and demurrage charges incurred during import, provided the charges are related to the import of goods.

- **Import Duty**: No, import duty paid is not eligible for Cenvat credit.

- **Excise Duty**: Limited applicability in the restaurant business context unless specific goods subject to excise duty are used in operations.

Ensure compliance with all documentation requirements and consult with a tax advisor or chartered accountant to optimize Cenvat credit utilization and ensure proper compliance with tax regulations.

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