Service Tax credit

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Querist : Anonymous

Querist : Anonymous (Querist)

11 June 2010 Sir,

Is set off available for service tax by NBFC?

Querist : Anonymous

Querist : Anonymous (Querist)

11 June 2010 Sir,

Is set off available for service tax by NBFC?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Yes, set-off (input credit) for Service Tax was generally available to NBFCs (Non-Banking Financial Companies) under the CENVAT Credit Rules, 2004, subject to certain conditions.

Here's a simplified explanation:
✅ Service Tax Input Credit for NBFCs (Prior to GST - i.e., before July 2017):

NBFCs, like other service providers, were allowed to take credit of input services used for providing taxable output services. However, there were specific restrictions and nuances:

🔸 Conditions for Availing CENVAT Credit:
Service should be used for providing taxable output service.
Credit was not allowed on services used for exempted services or non-taxable services (e.g., interest income from loans/advances was exempt).
NBFCs providing both taxable and exempt services had to follow Rule 6 of CENVAT Credit Rules, which required:
Proportionate reversal of credit or
Paying 6% of exempt turnover unless they maintain separate accounts.
🔹 Common Examples of Input Services for NBFCs:
Legal and professional services
Office rent
Security services
Advertising and marketing
⚠️ Key Restrictions:
Credit of input services used for providing interest-bearing loans was not allowed unless proper reversal/proportioning was done.
If NBFCs did not maintain separate books, they had to reverse credit as per Rule 6(3).
🕓 Timeline Relevance:
Since you're referring to 2010, yes — NBFCs could avail of Service Tax credit, but only to the extent used for taxable services, and they needed to comply with the rules of CENVAT Credit.

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