Service tax paid on bundele of service

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 September 2018 Notification No 26-2012
Bundle of Service by way of Supply of food or any other article of human consumption or any drink in a premises together with renting of premises
abated @70% Taxable Value charged to Customer .?

While we have paid abated tax @ 4.94% on Food Supply.?

Whether abated tax paid on food can claimed as cenvat credit .?

Mahendra Doshi
02/09/2018

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

03 September 2018 Abated tax related to service only hence no cenvat credit can be claimed on it.

Querist : Anonymous

Querist : Anonymous (Querist)

06 September 2018 Dear Mr Seetharaman
we have paid abated tax on Food @ 4.94% on food supply to caterer and used food Supply or any other article of human consumption or any drink in a premises together with renting of premises under bundle of services .Why Set off is not available
Means First we are paying tax on food Purchase and subsequently raising bill under bundle of services along with food we purchase ?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

24 July 2025 Great question! Here’s the breakdown:

---

### Background:

* Under **Notification No. 26/2012-Service Tax**, services like **renting of premises bundled with supply of food/drinks** are taxed with a 70% abatement.
* Effectively, service tax is paid on only 30% of the total value (considering 70% abatement).
* So, the **effective tax rate** works out to roughly **4.94% (30% of 14.5%)** on the total amount charged to customers.

---

### Your situation:

* You **purchase food items** (paying VAT or excise duty on them).
* You provide a bundled service — food + renting premises, charging service tax on the **abated value**.
* You want to know if you can claim **Cenvat Credit** (input credit) on the abated service tax paid on the bundled service.

---

### Clarification on Cenvat Credit on Abated Service Tax:

* **Cenvat credit can be claimed only on service tax paid on input services or input goods used in providing output service/goods.**
* Here, the **tax paid on the bundled service (after abatement)** is the **output service tax**, not an input service.
* You **cannot claim credit on output service tax paid** — it’s a liability, not an input.
* The **food items purchased** may attract VAT or excise duty, which may be creditable separately under VAT or excise laws, but **service tax paid on the bundled output service cannot be claimed as Cenvat credit**.
* So, the **abated service tax paid on the bundled service cannot be set off** as Cenvat credit.

---

### Summary:

* Tax paid on purchase of food items = VAT/excise credit (if applicable).
* Service tax paid on bundled service (food + renting) = output tax liability — **No Cenvat credit** on this.
* This is consistent with service tax law and Cenvat Credit Rules.

---

If you want, I can help you draft an explanation or get you references from notifications and circulars. Would you like that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now