Reversal of service tax credit

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Arun (Querist)

02 April 2013 Asset was purchased 2years back and service tax credit fully availed, now we are selling the above said asset which is in working condition , Whether we have to Reverse the service tax credit already taken.

Sumit Grover

Sumit Grover (Expert)

02 April 2013 yes...you need to reverse the Credit as per the provisions of Rule 3(5) of CCR,2004 which states as follows:

"if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:-

for computers and computer peripherals:
--for each quarter in the first year @ 10%
--for each quarter in the second year @ 8%
--for each quarter in the third year @5%
--for each quarter in the fourth and fifth year @1%

other than computers and computer peripherals @ 2.5% for each quarter.

It is assumed that the asset mentioned in your query on which CENVAT was taken, fall under the category of "Capital Goods" as defined under Rule 2(a) of CCR,2004

I guess it must have been a Software...because, practically, these are the only goods on which excise & serfvice tax are usually levied..... In other most of the assets, service tax is not levied on goods.

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