Service tax on atm vendor services

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 July 2015 Nowadays, Banks outsource certain ATM (Automated Teller Machine) related services to other agencies such as operations,maintenance or management of hardware and software, cash replenishment etc. Since these services are taxable service provider is liable to pay service tax.
Agencies(Service Providers) are collects the charges per transaction including service tax from Banks & make the payment
to Govt. Banks collects charges (including service tax)from their customers / Other Banks in case ATM is used by other bank
customers & make the service tax payment to Govt.
Request you to clarify the following points on the aforesaid transactions :-
a) Bank can claim CENVAT on input credit ?
b) If yes, what is the percentage of CENVAT can claim, what are the details to be maintained for the same.
c) Bank can set-off the input credit with service tax payable on charges collected from customers / other banks on the same
transactions, what are the details to be maintained for the same.

Querist : Anonymous

Querist : Anonymous (Querist)

10 August 2015 Please clarify my doubts.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Here's a clear breakdown of your query about **Service Tax on ATM Vendor Services** and related CENVAT credit issues:

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### a) **Can Banks claim CENVAT credit on service tax paid to ATM service providers?**

* **Yes**, Banks can claim CENVAT credit on the service tax paid to outsourced ATM vendors for taxable services like operations, maintenance, management of hardware/software, and cash replenishment.
* These services fall under taxable categories like "Business Auxiliary Services" or "Support Services," so the service tax paid is eligible for credit.

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### b) **What percentage of CENVAT credit can banks claim and what details need to be maintained?**

* **100% CENVAT credit** on the service tax paid on the invoices received from ATM service providers can be claimed, subject to standard CENVAT Credit Rules.
* **Details to maintain:**

* Original invoices issued by the service provider showing service tax separately.
* Proper agreement/contracts with ATM vendors.
* Records of payment made to the vendor.
* Maintain proper accounting of services availed and tax paid.
* Reconcile input service tax credits with tax payments in the return (ST-3).
* Banks must ensure the services are used exclusively for their taxable business activities to avoid credit denial.

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### c) **Can the bank set off input credit against service tax payable on charges collected from customers / other banks?**

* **Yes**, banks can utilize the CENVAT credit (input service tax credit) to set off the service tax liability on the charges they collect from their own customers or other banks (in case of inter-bank ATM usage fees).
* This is allowed under the **CENVAT Credit Rules** as long as:

* The credit is available on taxable input services.
* Proper documentation and records are maintained.
* The service tax liability is correctly calculated on the amount charged to customers or other banks.

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### Summary:

| Query | Answer |
| ------------------------------------- | ---------------------------------------------------------------- |
| Can bank claim CENVAT credit? | Yes, on service tax paid to ATM vendors. |
| % of credit claimable | 100% on eligible service tax paid. |
| Documentation needed | Vendor invoices, contracts, payment records, accounting entries. |
| Set-off against service tax collected | Yes, can adjust input credit against tax on charges collected. |

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If you want, I can help draft a checklist for documentation or a sample accounting entry for these transactions. Would you like that?

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