Pradeep Jain - Chartered Accountant

Query

(alfa) Posted On: 26 Sep, 2012

We are authorized service station service provider. we provide repairs and maintenance service to vehicles. my question is: 1. can we take cenvat credit of service tax paid on rent paid on workshop and showroom. 2. when we repair the vehicle we also use new/replace spares parts. how to charge service tax in our invoices? whether 2 separate bills to be raised? one for spares parts + vat and another for repairs + service tax. Please help.

1. As per Rule 2(l) of Cenvat Credit Rules, 2004 “(i) input service means any service used by a provider of output service for providing an output service”. Further the renting of immovable property is also not covered under any exclusion clause of definition of ‘input service’. As renting of workshop and showroom is an input service used for providing output service therefore Cenvat credit will be available. 2 & 3. Work contract is defined in the section 65B, which reads as follows: “(54) work contract means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such properly” The above definition makes it clear when there is transfer of property in goods involved in execution of such contract, it will be work contract service. Further separate bill is raised or not it will still remain ‘work contract service’. As your service is covered under the definition of ‘work contract service’ therefore it’s treatment will be done as per Rule 2A of Service Tax (Determination of value) Rules, 2006. According to (i) of Rule 2A: “(i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract” As in your case, the value can be determined according to above (i) i.e. value of material portion can be separated from gross amount charged, therefore this will be applicable and you can charge bill according to this Rule i.e. in the invoice, show the gross amount charged and then deduct the value of material supplied, then charge service tax on net amount (i.e. on service portion). For more detail you can refer Notification No. 24/2012-ST at following link:-- “http://www.new.capradeepjain.com/redirect_amdview_5924_3”

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