Input credit of st paid on rent of property

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CA Sanjay Baheti

PROPRIETOR

639 Points Posted on 20 October 2014

One of my client registered with ST Dept. under Restaurant Services. my client has taken the said restaurant on Rent & paying rent along with Service tax Portion on monthly basis to landlord who also covered under service tax net for Renting of Immovable Property.

Also My client is availing Abatement benefit for the said restaurant services @ 60% by virtue of Notification 26 of 2012 as per Service Tax law i.e. he is paying Service tax only for 40% of Taxable value.

Now query is whether my client can claim as input credit for service tax paid on renting of said property at where he is carrying/providing restaurant services from his Service tax liability on restaurant Services as taxable services after availing benefit of abatement under notification 26 of 2012 or not.

Please reply at the earliest

Replies (3)

Manoj Agarwal

Service Tax Consultant Rourkela Service

2755 Points Posted on 20 October 2014

Yes, cenvat credit on rent can be availed.

Vishal Goel

Chartered Accountant

1725 Points Posted on 16 March 2015

Explanation II to Rule 2C of Service Tax (Determination of Value) Rules,

For the removal of doubts, it is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986)].

Explanation II to Rule 2C has specified that the restaurant service provider shall not be allowed to take CENVAT credit of the duties and cess paid on inputs, however nothing shall preclude them from taking CENVAT credit of input service used in or in relation to provide the restaurant service. Thus, it can be seen that the restaurants can take CENVAT credit of service tax paid on input services.