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Service Tax Credit against rent.

Abhisek Rungta (PRACTISING CHARTERED ACCOUNTANT) (234 Points)

07 October 2009

I want to know if I have collected service tax on rent and that is not my main business but i am a manufacturing concern , am I available to take Service tax credit on all other services like freight , telephone etc

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5 Replies

Gautam Joshi (Partner) (361 Points)
Replied 07 October 2009

Hi Abhishek,

Good question. When we are asking for a CENVAT Credit claim in Indirect Tax or we ask for allowance of Expenditure from Income in case of Direct Tax, we are required to prove the Nexus. Nexus stands for relationship of Income with Expenditure.

In your case, you need to prove to the department that for earning income of rent you incurred expenditure of telephone and frieght or so and so expenses. If they are incurred for your manufacturing business then undoubtedly CENVAT Credit of the same can not be claimed against your rent income.

Hope I justified my point.

Warm Regards.

Abhisek Rungta (PRACTISING CHARTERED ACCOUNTANT) (234 Points)
Replied 07 October 2009

That what i also thought, thanks GAUTAM

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 08 October 2009

Normally nexus is preferable for credit but in my view not essential if the scheme as a whole is taken.

It maybe important to know that there is a concept of - one to one corelation- not applicable to cenvat credit. The decisions in central excise maybe perused to get a good idea on this.