Service tax setoff
This query is : Resolved
04 January 2015
I am running a partner ship trading firm.
My trading centres are on rented properties for which I am paying rent with service tax. On other side I takes work contract for kitchen furnishing, Wall claddings etc on which I collects service tax from my clients. Now I wish to know whether set off mechanism is applicable on service tax collected by me and the service tax paid.
05 January 2015
Yes if you are using the said premise for providing of Taxable services then you will be eligible for cenvat credit under rule 2(I) of CCR 2004
05 January 2015
$$) As per sub rule (1) of Rule 3, "CENVAT Credit", of the CENVAT Credit Rules, 2004; " A manufacturer or producer of final products or a provider of output serviceshall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -
(ix) the service tax leviable under section 66 of the Finance Act; and
(ixb) the service tax leviable under section 66B of the Finance Act.
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004),
(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007).
$$) As per sub rule (l) of Rule 2, "Definitions", of the CENVAT Credit Rules, 2004; " input service" means any service, -
(i) used by a provider of output service for providing an output service
(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.
$$) As per sub rule (1) of Rule 6, "CENVAT Credit", of the CENVAT Credit Rules, 2004; "Obligation of a manufacturer or producer of final products and a provider of output service", The CENVAT credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services except in the circumstances mentioned in sub-rule (2).
$$) As per sub rule (2) of Rule 6, "CENVAT Credit", of the CENVAT Credit Rules, 2004; "Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for-
(a) the receipt, consumption and inventory of inputs used-
(i) in or in relation to the manufacture of exempted goods;
(ii) in or in relation to the manufacture of dutiable final products excluding exempted goods;
(iii) for the provision of exempted services;
(iv) for the provision of output services excluding exempted services; and
(b) the receipt and use of input services-
(i) in or in relation to the manufacture of exempted goods and their clearance upto the place of removal;
(ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal;
(iii) for the provision of exempted services; and
(iv) for the provision of output services excluding exempted services,
and shall take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b).
On the combined reading of all the above provisions of the CCR 2004, we can deduce that the CENVAT Credit of input services is available for payment of service tax liability. However, the input services should SOLELY be used to provide output service or in manufacture of excisable goods.
In case, the manufacturer or provider of output service uses such input services for provision of exempted services / non excisable goods, he shall not liable to take CENVAT Credit of service tax paid on such input service.
Further, the provider of output service may prepare separate books of accounts for taking the eligible and rightful credit of service tax paid.
Thus, in your current position, you shall not be able to take the credit of service tax paid.
Hope it resolves your query.
(ix) the service tax leviable under section 66 of the Finance Act; and
(ixb) the service tax leviable under section 66B of the Finance Act.
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004),
(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007).
$$) As per sub rule (l) of Rule 2, "Definitions", of the CENVAT Credit Rules, 2004; " input service" means any service, -
(i) used by a provider of output service for providing an output service
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal.
$$) As per sub rule (1) of Rule 6, "CENVAT Credit", of the CENVAT Credit Rules, 2004; "Obligation of a manufacturer or producer of final products and a provider of output service", The CENVAT credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services except in the circumstances mentioned in sub-rule (2).
$$) As per sub rule (2) of Rule 6, "CENVAT Credit", of the CENVAT Credit Rules, 2004; "Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for-
(a) the receipt, consumption and inventory of inputs used-
(i) in or in relation to the manufacture of exempted goods;
(ii) in or in relation to the manufacture of dutiable final products excluding exempted goods;
(iii) for the provision of exempted services;
(iv) for the provision of output services excluding exempted services; and
(b) the receipt and use of input services-
(i) in or in relation to the manufacture of exempted goods and their clearance upto the place of removal;
(ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal;
(iii) for the provision of exempted services; and
(iv) for the provision of output services excluding exempted services,
and shall take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b).
On the combined reading of all the above provisions of the CCR 2004, we can deduce that the CENVAT Credit of input services is available for payment of service tax liability. However, the input services should SOLELY be used to provide output service or in manufacture of excisable goods.
In case, the manufacturer or provider of output service uses such input services for provision of exempted services / non excisable goods, he shall not liable to take CENVAT Credit of service tax paid on such input service.
Further, the provider of output service may prepare separate books of accounts for taking the eligible and rightful credit of service tax paid.
Thus, in your current position, you shall not be able to take the credit of service tax paid.
Hope it resolves your query.
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