Credit Input Query - service Tax

This query is : Resolved

ravinder singh rawat (Querist)
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05 May 2008 Dear Experts,

if we have received 200/- rs. service tax in April-08 and paid 250/- to those who provide us services then its mean credit input is more then service received. then its mean we have no liability to pay Service Tax in May-08 to Government.

or one thing more can we also Forward balance Rs. 50/- for next month in June-08 while depositing service tax..

Amit Sharma

Amit Sharma (Expert)
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05 May 2008 This will help you to understand better.

INTRODUCTION TO CENVAT CREDIT TERMINOLOGY:

„X All the rules are in accordance with CENVAT Credit Rules, 2004.
„X INPUT:- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer.
„X INPUT SERVICES:- used by provider of taxable service for providing an output service; or used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture if final products and clearance of final products from the place of removal.
„X OUTPUT SERVICES:- means any taxable service provided by the provider of taxable service, to a customer , client, subscriber , policy holder or any other person , as the case may be, and the expressions ¡§provider¡¨ & ¡§provided¡¨ shall be construed accordingly.

WAYS OF CLAIMING INPUT CREDIT (PRE BUDGET):

. 20 % rule :- which says that one can claim a max of 20 % of the total taxable service on which service tax has to be paid.

. Separate books of accounts: - which says that one will have to maintain seperate sets of books for service tax and therefore the input credit availed will be forgone , which meant to say that it cannot be carried forward.

WAYS OF CLAIMING INPUT CREDIT (POST BUDGET):

. 8 % rule:- which says that you can claim a max of 8 % of the total taxable services on which service tax has to be paid.

. Proporion basis:- which says that one will have to take the aggregate credit availed multiply it with the revenue earned divided by the total revenue earned by all the units of the company.

However is it said that on an average basis Proportion basis is preferred over 8 % rule.

Please read and you will understand it is self explanatory.

Also see under what type of method you have availed input credit.