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Input tax credit on service tax

Tahseen Tabassum (CA-FINAL) (644 Points)

25 April 2009

A Company was providing service of Supply Installation Testing & Commissioning which have an abatement of 66% on the gross value of the service provided, on these tax liability the company cannot avail the credit of input tax. The liability comes to Rs.44,431/- the co. have to deposit this but it has taken the set-off against the input tax credit standing from the last quarter from the other type of services provided by him.

I want to know whether the company is right on doing so. Please can anyone explain this to me i will be thankfull.

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3 Replies

atul gupta (proprieter) (97 Points)
Replied 25 April 2009

Originally posted by :Tahseen Tabassum
"	A Company was providing service of Supply Installation Testing & Commissioning which have an abatement of 66% on the gross value of the service provided, on these tax liability the company cannot avail the credit of input tax. The liability comes to Rs.44,431/- the co. have to deposit this but it has taken the set-off against the input tax credit standing from the last quarter from the other type of services provided by him. I want to know whether the company is right on doing so. Please can anyone explain this to me i will be thankfull.	"

For this we read the proviso given in Noti. No. 1/2006 ST 01.03.2006 which reads as under:

"Provided that this notification shall not apply in cases where, -

(i) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has been taken under the provisions of the CENVAT Credit Rules, 2004; "

here it is clear that theNoti. puts restriction only on the cenvat credit taken on the input service which is used for providing such taxable service not otherwise. It nowhere talks about payment of Service Tax. should be in cash. So payment will be determined by CENVAT Credit Rules.

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Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 25 April 2009

The company cannot take credit on inputs/inpt services used in providing installation output service. If the company is providing other output services, and taking credit on the input services of those output services, there is nothing wrong. Further, that credit can also be used in paying service tax on installation services.