You can either claim abatement or set-off
This query is : Resolved
22 April 2015
if i charge service tax on a lower rate a applicable as per abatement, can i avail cenvat credit, if No then is it for all kind of services,
I mean only one thing can be done either abatement or input credit.
kindly confirm
I mean only one thing can be done either abatement or input credit.
kindly confirm
22 April 2015
Answer to your query is service specific. Such as in works contract service CENVAT in input material is not allowed but on input services and on capital goods are aloowed etc.
However in general if abatement is availed CENVAT on input and input services is not allowed.
However in general if abatement is availed CENVAT on input and input services is not allowed.
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22 April 2015
Thanks Amit,
Kindly advice me on the below.
i have came accrosed a client who is asking me to charge service tax @ 4.94 % (ie Abatement), but as i am getting the same service from my vendor @ 12.36 %, so My question is as below
1) if i give my client a bill @ 4.94 can i avail input credit ( ie set off)
2) if i get a bill from my vendor @ 4.94 for this transaction only, how can i calculate my service tax. can i avail 4.94 input credit against 4.94 output service tax paid.
waiting for your valuable reply.
Kindly advice me on the below.
i have came accrosed a client who is asking me to charge service tax @ 4.94 % (ie Abatement), but as i am getting the same service from my vendor @ 12.36 %, so My question is as below
1) if i give my client a bill @ 4.94 can i avail input credit ( ie set off)
2) if i get a bill from my vendor @ 4.94 for this transaction only, how can i calculate my service tax. can i avail 4.94 input credit against 4.94 output service tax paid.
waiting for your valuable reply.
03 August 2025
Great questions! Here’s a clear breakdown to help you understand the interplay between abatement and CENVAT credit for service tax:
1. Can you avail CENVAT credit if you charge service tax at a lower rate (with abatement)?
Generally, NO.
If you avail abatement, you cannot claim CENVAT credit on inputs and input services used to provide that abated service.
This is because the abatement itself is a concessional scheme that reduces your taxable value. The tax paid on inputs is not allowed to be credited as it would lead to double benefit.
Important: The rules differ for different services. For example, in works contract services, CENVAT credit on input materials is not allowed whether or not abatement is availed, but credit on input services and capital goods may be allowed.
2. If you charge your client @4.94% (abatement rate), can you avail input credit on the same?
No, if you are charging service tax on the reduced taxable value due to abatement, you cannot take credit of input service tax paid.
3. If you get a bill from your vendor at 4.94% service tax, how do you calculate your service tax and credit?
The vendor is charging you tax on a reduced value after abatement.
Since you are availing abatement, you cannot claim CENVAT credit on that input service.
Your output tax liability will be on the abated value charged to your client (4.94%).
You cannot set off input tax paid on your vendor bill against your output tax liability if abatement is claimed.
Summary Table
Scenario Can Avail CENVAT Credit? Output Tax Rate Comments
Charging client with abatement No Lower (e.g. 4.94%) Abatement means no input credit allowed
Getting vendor bill with abatement No Vendor charges lower tax You pay lower tax, no credit allowed
Charging full rate without abatement Yes Full rate (e.g. 12.36%) You can avail credit on inputs/input services
Bottom line:
You choose either to charge tax on abated value (no input credit) OR
Charge tax on full value and avail credit on inputs/input services.
You cannot do both for the same service.
1. Can you avail CENVAT credit if you charge service tax at a lower rate (with abatement)?
Generally, NO.
If you avail abatement, you cannot claim CENVAT credit on inputs and input services used to provide that abated service.
This is because the abatement itself is a concessional scheme that reduces your taxable value. The tax paid on inputs is not allowed to be credited as it would lead to double benefit.
Important: The rules differ for different services. For example, in works contract services, CENVAT credit on input materials is not allowed whether or not abatement is availed, but credit on input services and capital goods may be allowed.
2. If you charge your client @4.94% (abatement rate), can you avail input credit on the same?
No, if you are charging service tax on the reduced taxable value due to abatement, you cannot take credit of input service tax paid.
3. If you get a bill from your vendor at 4.94% service tax, how do you calculate your service tax and credit?
The vendor is charging you tax on a reduced value after abatement.
Since you are availing abatement, you cannot claim CENVAT credit on that input service.
Your output tax liability will be on the abated value charged to your client (4.94%).
You cannot set off input tax paid on your vendor bill against your output tax liability if abatement is claimed.
Summary Table
Scenario Can Avail CENVAT Credit? Output Tax Rate Comments
Charging client with abatement No Lower (e.g. 4.94%) Abatement means no input credit allowed
Getting vendor bill with abatement No Vendor charges lower tax You pay lower tax, no credit allowed
Charging full rate without abatement Yes Full rate (e.g. 12.36%) You can avail credit on inputs/input services
Bottom line:
You choose either to charge tax on abated value (no input credit) OR
Charge tax on full value and avail credit on inputs/input services.
You cannot do both for the same service.
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