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Service Tax

Deeps (Article Assisstant) (2485 Points)

07 October 2009

When a company pays Mobile bills of its employees. Is the company eligible to avail credit on service tax paid by it? If yes, pl. tell the relevant section and cirular no.

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29 Replies

Sivaprasad (Assistant Manager (F&A)) (63 Points)
Replied 07 October 2009

HI Deepika,

The Company cannot claim the credit for the employee personal bill payment. Because the basic concept of availing credit is the input service is used for providing output service hence the company cannot claim the creidt of service tax part on the mobilr bill payment. Hope it clarified.

Cheers,

Siva

Gautam Joshi (Partner) (361 Points)
Replied 07 October 2009

Hi Deepika,

Take a look at the circular No. 97/8/2007-ST dated 23-08-2007. You can see it on www.servicetax.gov.in

As sir Sivaprasad said, CENVAT on a personal expenditure can never be allowed to business assessee just like a personal expenditure is disallowed in income tax. A nexus (relationship between expense and income) does not exist in such case and so no credit can be allowed.

Warm Regards.

Deeps (Article Assisstant) (2485 Points)
Replied 07 October 2009

Thank You Very Much:))

Madhukar N Hiregange (Chartered Accountant) (39039 Points)
Replied 08 October 2009

Dear Deepika,

There is a contrary view which I wish to put forward.

In todays world employees are provided mobiles by companies to ensure that they are reachable at any time by the company / cusotmers/ suppliers. Otherwise why should they provide the same. It is certainly not for making personal calls which would take away an employees time.

On the above argument there would eb a good case to say that majoirty of the calls made would be for the business.

It maybe prudent to avail credit on say 90% of the same stating that the balance is personal. In my view the tribunal would look at the same favourably especially when a part is not being availed.

Satish (CA Final Student) (479 Points)
Replied 08 October 2009

I agree with Madhukar Sir's view

Sumit (Software Developer) (34 Points)
Replied 08 October 2009

Thanks for information.

https://www.sagarinfotech.com/Payroll.aspx

Gautam Joshi (Partner) (361 Points)
Replied 08 October 2009

Hi all,

To prove a nexus of the expenditure is always on assessee. If you can prove it with the authority you can always avail credit 90%/100% whatever pro-rata.

This is something which should be decided by putting our shoes in authorities side. Assessee should divide the whole expenditure itself in personal as well as business and than credit will automatically reduce by personal extent.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 08 October 2009

To go with Mr Madhukar N.Hiregange as he is the Tiger wood in Indirect Tax watch carefully what he has to say

Deeps (Article Assisstant) (2485 Points)
Replied 08 October 2009

Originally posted by :Madhukar N Hiregange
"	Dear Deepika, There is a contrary view which I wish to put forward. In todays world employees are provided mobiles by companies to ensure that they are reachable at any time by the company / cusotmers/ suppliers. Otherwise why should they provide the same. It is certainly not for making personal calls which would take away an employees time. On the above argument there would eb a good case to say that majoirty of the calls made would be for the business. It maybe prudent to avail credit on say 90% of the same stating that the balance is personal. In my view the tribunal would look at the same favourably especially when a part is not being availed.	"

Thank you sir...
suppose if employee's landline is reimbursed, then what the comapny shall do with the service tax payment. can it avail credit even on that?

Girish Mathuria (STUDENt) (138 Points)
Replied 08 October 2009

Can Anyone TEll me THat what is the service tax rate applicable for Nov-09 Attempt of PCC Exam

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 08 October 2009

Ms Deepika

I think you cannot take cenvat credit for Landlines given to employees as it is not for Business purpose.But the thing is now one to one correlation or input output correlation has been done away with.In such a case whether it could be done? Let us watch what Mr Madhukar has to say on this

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 08 October 2009

Mr Girish service tax rate is 10% +2%cess+1% HSEC Totals 10.30% effective 24.2.2009

Chintan Vasa (CA Final Student M.Com) (1241 Points)
Replied 08 October 2009

What is imporatant is the nexus of input service for providing output service. Even if an employee uses it 1% for official purpose then also the credit shall be allowed.