Input tax credits on vehicle warranties

Of the various changes in the CENVAT Credit Rules,2004 that were effected in Budget 2011, an intriguing one relates to the disallowance of input tax credits on warranty services relating to motor vehicles. By way of context, the relevant definition of input service, as it stood prior to the aforesaid change, read as follows:- (l) “input service” means any service,- i) used by a provider of taxable service for providing an output service, or ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes ………………… activities relating to business,……………………. Thus, activities relating to business were eligible for the offset and there were no exclusions to the definition, as it stood prior to the amendments of 2011.

Source : Business Standard