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service tax exemption and input credit

aasita (ACA) (387 Points)

22 August 2009

My turnover is 1200000 that mean i have to pay service tax for 2 lakhs but will i be able to get credit for all the inputs and input services?

I think yes

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18 Replies

shrikant (self ) (65 Points)
Replied 22 August 2009

U CAN

but ( i think ) only for the input service and inputs received from the date u crossed exemption limit in r/o your output service ( i presumed that u obtained PAN BASED registration from authority)

please ensure the service and goods relating to which u take credit actually fits into the meaning assigned under rule 2 of CENVAT credit rules, 2004

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P.Murugan (Accountant) (31 Points)
Replied 22 August 2009

My name is Murugan and i am working in a steel factory. I have the doubt related to the availment of service tax credit on the service or maintenanace of Motor Car.

Till date, i or we had taken the service tax credit on service tax paid for the service of Car (Qualis), which was used by our MD, and the same was purchased in the company name.Not only that, it is an asset to the company and charged depreciation every year at the time of finalisation of accounts every year.

but now, the central excise audit team object or not eligible the same on the ground that it is not related to manufacture of final products.

So,please clarify the above matter with case laws if available.

shrikant (self ) (65 Points)
Replied 22 August 2009

Hi,

regarding service tax credit on the service or maintenanace of Motor Car, recent judgement from CESTAT , MUMBAI (writing out of memory .. pl.check correct citation ) held that airtravel etc. are not conventional input service in the facts of that particular case and credit of nput service under unconventional business practise is ineligble. Ur case appears to fall under such a situation. As of now..u may not get nod from tax autorities for allowing credit unless u prove that such maintenance is absolutely fits into meaning of input service..

Satish (CA Final Student) (479 Points)
Replied 23 August 2009

You would have been allowed to take credit of service tax on maintenance Service of Car, had your been a purly service industry. Yours is a manufacturing industry and those input credits which are specifically relates to manufacturing are only allowed.

shrikant (self ) (65 Points)
Replied 28 August 2009

the following waa the query in expert corner

Q.1 If I am not sure about my professional fees receipt that it will cross 10lacs or not?
So should I charge SERVICE TAX from day 1 or not. & if I pay service tax and at year end my professional fees receipt does not exceed 10 lacs. Then shall I get refund of the service tax I paid?

Q.2 If for example my professional fees receipt is 13 lacs for year so should I have to pay service tax for full 13 lacs or the balance i.e 13 lacs – 10 lacs i.e only on 3 lacs. As there is rule no service tax upto 10 lacs.

my answer is as below

No need to charge service tax on your professional fees until u cross the exemption limit. Beware, charging ST and collecting thesame and not paying to Govt. account is an offence (even if u r within exemption limit)

ALTERNATIVELY,

obtain registration from day one and charge ST, collect from receipient and pay to the Govt. account.

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Satish (CA Final Student) (479 Points)
Replied 29 August 2009

Dear Mr. Shrikant, Threshold limit of 10 lakh is an exemption from paying service tax to the small service providers. You need not pay service tax upto Rs. 10 Lakh of gross receipts of services during the financial year. The condition precedent for the said exemption is that you should not have crossed Rs. 10 Lakhs of gross receipts duing the preceding financial year. If you have crossed the same during preceding financial year, you need to pay service tax from the first rupee in the current financial year. You need to register yourself under service tax on reaching 9 lakh of gross receipts during the current financial year. But the liability to pay service tax arises only after you exceed 10 lakh gross receipts & that too the liability to pay is over & above 10 lakhs of gross receipts.

EKALABYA TALUKDAR (SERVICE TAX CONSULTANT) (666 Points)
Replied 29 August 2009

Originally posted by :aasita
"	My turnover is 1200000 that mean i have to pay service tax for 2 lakhs but will i be able to get credit for all the inputs and input services? I think yes	"

Are you already registered with Service Tax. If YES you may charge Service Tax. If you Collect Service Tax you have to pay the Service Tax to Service tax Authority and claim the Credit on valid grounds. Rs 10,00,000.00 is a barrier to benifit the small enterpenure from "Service Tax Formalities" only.

shrikant (self ) (65 Points)
Replied 30 August 2009

Mr. Satish,

yes, u r right as regards to finer details/conditions of SSI exemption..thnx for elaboration..

Anil k (ABC) (36 Points)
Replied 30 August 2009

Hi

please give me advice whether the a party providing taxable service to the extent of Rs.200000/- is liable to charge service tax if the already liable to pay excise duty (covered under excise & custom for rest of its business.

shrikant (self ) (65 Points)
Replied 31 August 2009

Hi, Mr. Anil K,

Excisable goods turn over and service turnover are independent .

but, check whether u satsfy conditions explained in reply of Mr. Satish for ur service tax registration..

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P.Murugan (Accountant) (31 Points)
Replied 09 September 2009

The service Provider under the category of Manpower Recruitment Agency Service, i.e the contractor who engaged in the production activity on behalf of us (the Manufacturer) by mutual agreement, whose provided services to us from 01.04.2006 to till date and they was not paid until date for the service rendered. Now, the same has noticed by the central Excise Auditing team and ordered to pay the service tax with interest.

My Query is – what is the basis for payment of Service Tax i.e whether the payment of service tax is on payment basis made to contractor by us after deducting the TDS & PF or the value of Service provided by him.

Another one is how to calculate interest (13 %) if the service tax has paid on payment basis or Value of Service Provided basis.

Is any exemption available to the maximum limit for one-year service provided?

Please Clarify with Rules.

Satish (CA Final Student) (479 Points)
Replied 09 September 2009

Mr. Murgan,

First of all, It is not clear that the service u have mentioned is fall under Manpower Recruitment Service or Business Auxiliary Service. If the contractor is making production on your behalf, it would be Business auxiliary Service. But if the contractor is supplying labour to you, it would be Manpower Recruitment Service. Please clarify first then only some opinion can be given.

EKALABYA TALUKDAR (SERVICE TAX CONSULTANT) (666 Points)
Replied 10 September 2009

Originally posted by :P.Murugan
"	The service Provider under the category of Manpower Recruitment Agency Service, i.e the contractor who engaged in the production activity on behalf of us (the Manufacturer) by mutual agreement, whose provided services to us from 01.04.2006 to till date and they was not paid until date for the service rendered. Now, the same has noticed by the central Excise Auditing team and ordered to pay the service tax with interest. My Query is – what is the basis for payment of Service Tax i.e whether the payment of service tax is on payment basis made to contractor by us after deducting the TDS & PF or the value of Service provided by him. Another one is how to calculate interest (13 %) if the service tax has paid on payment basis or Value of Service Provided basis. Is any exemption available to the maximum limit for one-year service provided? Please Clarify with Rules.	"