Refund of input service tax on utilisation of services
This query is : Resolved
13 August 2009
Facts: A company (100% EOU)exports software services to foreign clients.
As per rule 4 of export of service rules 2005, the company does not pay service tax on the export of services.
As there is no output service tax "cenvat credit" on the services utilised is not taken to current assets in the balance sheet. Instead it is charged to the profit and loss account
Now the question is: For claiming the refund of service tax on input services from the department IS IT NECESSARY THAT CENVAT CREDIT ACCOUNT HAS TO BE SHOWN IN THE BALANCE SHEET. In any case, the company would be submitting the export invoices, FIRCs, bankers certificate and vendors bills like courier, audit fees, to the department for claiming the refund of service tax on input services.
Kindly clarify the doubt
As per rule 4 of export of service rules 2005, the company does not pay service tax on the export of services.
As there is no output service tax "cenvat credit" on the services utilised is not taken to current assets in the balance sheet. Instead it is charged to the profit and loss account
Now the question is: For claiming the refund of service tax on input services from the department IS IT NECESSARY THAT CENVAT CREDIT ACCOUNT HAS TO BE SHOWN IN THE BALANCE SHEET. In any case, the company would be submitting the export invoices, FIRCs, bankers certificate and vendors bills like courier, audit fees, to the department for claiming the refund of service tax on input services.
Kindly clarify the doubt
14 August 2009
I THINK YOU SHOULD SHOW IT UNDER SCHEDULE 10 OF B/S. I.E. UNDER LOANS AND ADVANCES.
14 August 2009
Dear Mr. Arun Saboo,
Thank You for your response. However I would like to know whether it is mandattory under service tax act / rule / notification. Or the department insists that the same is to be shown as an balance sheet item
Thank You for your response. However I would like to know whether it is mandattory under service tax act / rule / notification. Or the department insists that the same is to be shown as an balance sheet item
20 July 2025
Key Points:
Is it mandatory to show CENVAT credit as a balance sheet item to claim refund?
No statutory requirement under Service Tax law (or rules/notifications) that CENVAT credit should appear as a separate balance sheet item.
The law primarily requires that you have paid service tax on inputs and you are eligible to claim refund on input service tax for zero-rated supplies.
Usually, CENVAT credit is shown as an asset (current asset) in the balance sheet when available, but if your accounting policy charges it directly to P&L, it's not against the law.
Will the department insist that it must appear in the balance sheet?
In practice, the department may ask for clarity or accounting treatment to verify that input tax credit was actually incurred and not adjusted elsewhere.
They usually focus on supporting documents: export invoices, FIRCs, bank certificates, vendor bills, and proof of service tax payment.
If accounting records consistently show input tax paid as expense (not credit), department may question it but there's no fixed rule that it must be a balance sheet item.
Recommended practice to avoid disputes:
Ideally, maintain a clear record of input service tax paid.
Maintain a CENVAT credit ledger or account, even if not shown in balance sheet, to track input tax paid.
Keep all invoices, export documents, bank certificates handy.
In case of audit or scrutiny, explain your accounting policy and provide documents.
Is it mandatory to show CENVAT credit as a balance sheet item to claim refund?
No statutory requirement under Service Tax law (or rules/notifications) that CENVAT credit should appear as a separate balance sheet item.
The law primarily requires that you have paid service tax on inputs and you are eligible to claim refund on input service tax for zero-rated supplies.
Usually, CENVAT credit is shown as an asset (current asset) in the balance sheet when available, but if your accounting policy charges it directly to P&L, it's not against the law.
Will the department insist that it must appear in the balance sheet?
In practice, the department may ask for clarity or accounting treatment to verify that input tax credit was actually incurred and not adjusted elsewhere.
They usually focus on supporting documents: export invoices, FIRCs, bank certificates, vendor bills, and proof of service tax payment.
If accounting records consistently show input tax paid as expense (not credit), department may question it but there's no fixed rule that it must be a balance sheet item.
Recommended practice to avoid disputes:
Ideally, maintain a clear record of input service tax paid.
Maintain a CENVAT credit ledger or account, even if not shown in balance sheet, to track input tax paid.
Keep all invoices, export documents, bank certificates handy.
In case of audit or scrutiny, explain your accounting policy and provide documents.
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