Input service credit

This query is : Resolved 

09 July 2012 whether the tax paid on bank charges can be claimed as credit in a service organisation?

09 July 2012 Yes, you can read Rule 2(l) of CENVAT Credit Rules, 2004 for detail. You can take credit of it.

09 July 2012 already gone through it but not clear can u please elaborate?


09 July 2012 Bank charges are not directly related to providing output service, then how can we claim the credit?

10 July 2012 Relevant Provision are as under:

“input service” means any service, -
(i) used by a provider of taxable service for providing an output service; or
(ii) used by a 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 services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises,
advertisement or sales promotion, market research,
storage upto the place of removal,
procurement of inputs,
accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services,
inward transportation of inputs or capital goods and outward transportation upto the place of removal;
but excludes services,-
A....
B.....
C......

It is clear from above definition that input services includes all office, administrative and selling expenses. Expressly it includes financing charges also. Accordingly i conclude that you can avail the cenvat credit on bank charges.

For any services to be included in the definition of input service, it is not mandatory that it should be direclty used for provision of output services.

I hope above is sufficed for you.

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