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Discussion > Service Tax > Queries >

Cenvat credit on service tax paid on retail shop

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DGM Accounts & Finance

[ Scorecard : 33]
Posted On 23 August 2012 at 17:51 Report Abuse

Please advice: A garment manufacturer having retail stores all over india removing the garments from his production unit by paying excise duty on MRP availing the abatement scheme. The manufacturer is paying service tax on rent of the retail stores. Now can the manufacturer claim CENVAT credit of the service tax paid on rent? And if the manufacturer is allowed to take the credit then what is the procedure for the same.


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Saurabh Maheshwari
B.com,CA Final

[ Scorecard : 4565]
Posted On 23 August 2012 at 18:19

Yes the manufacturer can claim the Cenvat credit of ST paid on rent because the rent was paid for furthence of the business. hence ST paid on the same is allowable as cenvat credit.

the necesarry condition for claiming cenvat credit is that:

you must have invoice showing the service tax charged.



Total thanks : 1 times




U S Sharma
glidor@gmail.com

[ Scorecard : 19371]
Posted On 23 August 2012 at 21:34

No

as the showroom is not a mandatory condition for sale, 

neither the place of sale is showroom, 

the goods were cleared from factory gate under MRP, so any expense beyond the factory gate is not input for the goods cleared. 

sorry, sad but true, that input credit is not available on such expenses, 




Nihal Batra
DGM Accounts & Finance

[ Scorecard : 33]
Posted On 24 August 2012 at 09:56

Dear Mr. Sharma,

Please go through the following article and advice:

 

Whether tax paid on services received by sales offices of manufacturers eligible as input credit? 
TIOL-DDT 1394
05.07.2010
Monday

 

WE received the following query:

a) Whether manufacturer may take credit of service tax paid on payment of rent/security agency in relation to sales office under the definition of input service and

b) Whether services like rent on immovable property/security agency consumed in sales office [situated at different locations] are CENVATable to the manufacturer as input service.

c) In such situation whether sales office requires registration and work as input service distributor.

In this regard, we are of the view that the sales offices of a manufacturer which receives invoices for taxable services (like rent or security agency as in the instant case) are regarded as an 'input service distributor' in terms of Rules 2(m) of the CENVAT Credit Rules, 2004 (hereinafter referred to as 'CCR') read with Rule 4A(2) of Service Tax Rules, 1994 (hereinafter referred to as 'STR') for procuring/purchasing input services.

However, the sales offices will have to obtain registration from the jurisdictional authorities in terms of Service Tax (Registration of Special Category of Persons) Rules, 2005 (hereinafter referred to as 'SRPR'). Further, in terms of Rule 9(10) of CCR read with Rule 4 of SRPR, as ‘input service distributors' they have to file half yearly returns with their jurisdictional authorities.

Further, the input service distributor shall be able to distribute the input credits received by them in the manner provided in Rules 7 and 9(1) of the CCR read with Rule 4A(2) of STR and the invoice issued by an input service distributor is a valid document for the purpose of availing CENVAT credit by the manufacturer if the said document is issued in terms of Rule 9(1)(g) of CCR.

As regards eligibility of CENVAT credit on taxable services procured  by the sales offices of the manufacturer viz., renting of immovable property and security agency service, we are of the view that these taxable services would get covered in the inclusive definition of 'input service as defined in Rule 2(l) of CCR under the phrase 'activities relating to business'. As these sales offices perform a crucial role in selling the products manufactured by the manufacturer, they are regarded as an important and integral part of the business of a manufacturer.

In view of the above, the taxable services procured by sales offices of manufacturers, in the instant case, taxable services like renting of immovable property and security agency service are 'input services' and hence, service tax paid thereon is eligible as CENVAT credit for the manufacturer. However, to avail the benefit of CENVAT credit by the manufacturer, the sales offices have to get registered with the jurisdictional authorities and follow the requisite procedures as stated above.



Total thanks : 1 times



Saurabh Maheshwari
B.com,CA Final

[ Scorecard : 4565]
Posted On 24 August 2012 at 16:22

@ Strong source.... made things vwry clear....thanks a lot..




U S Sharma
glidor@gmail.com

[ Scorecard : 19371]
Posted On 24 August 2012 at 17:21

Dear @  Nihal Batra

 

Please read the query carefully where the place of removal is factory gate under MRP, refer valuation rules sec 4A of excise. and its not the showroom in question.

if the goods are transferred to showroom under provisional payment of duty and thereafter cleared from showroom and actual duty liability is discharged from thereon, then without any doubt input credit of such showroom is cenvatable. provided the manufacturer registers the same under excise as depot. 

as regarding the post by you, its the paper publication by Times of India Limited, where in they strongly asked the assesee to register the premises 1st, and the advt is also in relation to "service tax" for input service distributors, ( applied in most cases of mobile phone service providers)

under CCR 2004 there are many cases where all expenses after sales are not eligible for input credit, unless the assesee has included the same in their assesable value, 

here the party clear the goods under MRP abatement, and not paying duty on which the showroom sales, hence as per valuation rules sec 4A, the same is sale at factory gate, and any expense after the factory gate is not an input for said goods. 

 

@ comments welcome :)

 

 

 

 

 




U S Sharma
glidor@gmail.com

[ Scorecard : 19371]
Posted On 24 August 2012 at 17:41

 

As regards eligibility of CENVAT credit on taxable services procured  by the sales offices of the manufacturer viz., renting of immovable property and security agency service, we are of the view that these taxable services would get covered in the inclusive definition of 'input service as defined in Rule 2(l) of CCR under the phrase 'activities relating to business'. As these sales offices perform a crucial role in selling the products manufactured by the manufacturer, they are regarded as an important and integral part of the business of a manufacturer.

In view of the above, the taxable services procured by sales offices of manufacturers, in the instant case, taxable services like renting of immovable property and security agency service are 'input services' and hence, service tax paid thereon is eligible as CENVAT credit for the manufacturer. However, to avail the benefit of CENVAT credit by the manufacturer, the sales offices have to get registered with the jurisdictional authorities and follow the requisite procedures as stated above.

 
 
from your post above please read the lines therein :)

 



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