Cenvat Credit

This query is : Resolved

CA. Sumit Shingala (Querist)
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06 May 2008 Respected Dear Sir(s),

We hv following query. We request your Valuable review on this.

The assessee is paying service tax on goods transportation by road freight....as a service receipient.

The assessee has availed credit of ST paid by it on Advertisement Exp. and have utilised the same for paying service tax on freight, payable by it as a receipient of service.

The assessee has done so upto 1st March, 2008, under bona fide assumption that, it is a "deemed service provider" and therefore can take credit and utilise the same for payment of service tax on frieght.

Sir, Will u please guide us as to
1. Whether such a credit can be availed and utilised by the Service Receiptient for Payment of Service Tax on Freight ?
2. Which are the sections/provisions/rules under which the assessee is eligible OR not eligible to availe and utilise such credit ?

Thanking You.

Awaiting a reply.

Amit Sharma

Amit Sharma (Expert)
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06 May 2008 Dear Sir,

CENVAT CREDIT RULES, 2004.

There are two ways of claiming credit (Post Budget)

1. 8% rule wherein , one can claim a max of 8% on the value of service tax payable.

2. Proportion Basis wherein , one can claim on this basis through the following method

Aggregate value of service tax paid multiplied by the revenue of the specific unit of the company divided by the total revenue of the company.

Only on these two basis you can claim Credit.

Hope your doubt is clear now sir.

Hari Venkata Ramana

Hari Venkata Ramana (Expert)
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07 May 2008 According to the information provided above, GTA becomes your input service only like your advertisements. So, for availing input credit of ST paid on GTA and Advertisements, You should have out put service which is taxable. Then only you are entitled for input credit.

Still if you have out put service, your ST on Advertisement becomes common input tax where u are entitled for 20% out put S.T Payable.

CA. Sumit Shingala

CA. Sumit Shingala (Querist)
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07 May 2008 Dear Sir (Amit Sharma),

Perhaps i have not been able to clarify my query to you.

The question here is not for now and its for situation prior and upto 1st march 08.

Also, for question is not involving any issue of exempt services and therefore this 8% stuff does not apply

Thanks.

Shyam Lal Naik

Shyam Lal Naik (Expert)
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21 May 2008 There has been cases by tribunals permiting usage of cenvat credit towards payment of Service Tax on GTA service as service receipient.

The Finance Act'08 has removed GTA service from the perview of "Output Service".

You are perfectly right.

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