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ALLOWABILITY OF CENVAT CREDIT

SAMEER (CHARTERED ACCOUNTANT) (304 Points)

05 February 2011

A SERVICE PROVIDER IS PROVIDING TWO CATEGORY OF SERVICES TO A CLIENT UNDER DIFF AGREEMENT, IS THE CENVAT CREDIT OF ONE CATEGORY IS ALLOWABLE AGAINST THE IBILITY OF SERVICE TAX IN RELATION TO OTHER SERVICE?

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8 Replies

pravin (student) (38 Points)
Replied 05 February 2011

hi Sameer

CENVAT on IP or IPS can be availed when they are used to provide Taxable OPS.

Once this condition is complied CENVAT credit can be taken.

so in your case CENVAT credit. It is based on OPS and IP or IPS used to provide the OPS and not on any category.

Ex: TWO sevices A and B

When you are providing Service A You could have used some IP or IPS and taken Credit.

Now you are providing service B as said above you would have taken Credit on IP or IPS .

Now this CENVAT Credit can be utilised for the Service TAx Liability irespective of the Serices rendered.

I hope your query is answered.

Thank You.

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SAMEER (CHARTERED ACCOUNTANT) (304 Points)
Replied 05 February 2011

Thanks pravin

But please go thru the definition of Input service vis a vis input

"input service" means any service,-

(i) used by a provider of taxable service for providing an output service; or

[(ii) used by the 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,]]

"input" means-

(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;

(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;

you can notice that in relation to "Input credit" it can be used for AN output service

However in case of Input it can be used for providing ANY output services

this makes us to understand that the intention of the lawmakers is to utilise credit of any particular input service is in relation to that particular output service only for which it has been consumed.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 February 2011

Originally posted by : SAMEER
	A SERVICE PROVIDER IS PROVIDING TWO CATEGORY OF SERVICES TO A CLIENT UNDER DIFF AGREEMENT, IS THE CENVAT CREDIT OF ONE CATEGORY IS ALLOWABLE AGAINST THE IBILITY OF SERVICE TAX IN RELATION TO OTHER SERVICE?

if the input services are common, then yes

otherwise NO

share the both service profiles to discuss more

SAMEER (CHARTERED ACCOUNTANT) (304 Points)
Replied 06 February 2011

Thanks Mr Sharma

Service provider is providing

1. Work contract services (Construction service) and

2. technical Consultancy services

Now Input services are

1. Sub contractor exclusively for Construction

2. common services like Telephone , legal consultancy, security services

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 06 February 2011

as input service 1 is used for your output1 only so the question of transfer of that credit does not arise,

for remaining services 2, u can shift to 1 or 2

remember the return is common and there is no bar to pay from combined, but at audit stage it will be disallowed and will invite panel proceedings like interest and penalty alongwith shortfall of tax paid.