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automobile dealer

vaibhav (article) (25 Points)

03 June 2010

In case of an automobile dealer,can service tax paid on freight on purchase of vehicle be set-off from services provided at the workshop of the dealer???????????????

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6 Replies

CA VINAY BANSAL (In job with KPMG) (289 Points)
Replied 03 June 2010

No.

The service tax paid on freight paid is under REVERSE CHARGE.

I think it cannot be sett off against any service tax liability ion account of output services.

Regards

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 03 June 2010

The incoming GTA ST even if paid on reverse charge is available as credit agianst the servcing ST as it is used for business and without the sale of the vehicles the service income would not arise. If I am not mistaken the Tribunal has specifically held so.

DEEPTI (DEPUTY MANAGER) (25 Points)
Replied 08 June 2010

The service tax credit can be avaield on the input GTA services. However in case of automobile dealer, he cannot claim the credit for transportation of vehicles to the showroom as the same is not an input service for providing any output service. The transportation is done for selling the vehicle to the ultimate customer.

Hope the same replies your query.

Thanks

praveen kumar devarapalli (Managing Director) (361 Points)
Replied 20 August 2011

I am agreeing with Ms Deepti. Most of the automobile dealers are purchasing the vehicle at door cost. They are not paying the frieght charges directly to the Logistic peoples. Vehicle value is inclusive of Frieght hence automobile dealer cannot cliam CENVAT Credit on frieght.

Mahendra Kumar K (GM) (21 Points)
Replied 23 August 2011

If the automobile manufacturer raises a service tax invoice on the dealer, showing freight cost and service tax separately on the invoice, can the dealer claim input credit on the service tax component ?

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 23 August 2011

Department may contend that the inward trasportation is a service directly relatable to the trading activity which is not a taxable service and hence the GTA service is not input service for the vehicle servicing activity. As Madhukar sir says we can argue that without trading there is no vehicle servicing. If the amount is materials you can take the credit and fight it out.