26 July 2008
In an educational institution, no service tax is recovered or paid on its main activities. The Institute's income is also exempt under IT Act.
The Institute however carries out certain project activities being sponsored by outside agencies and the Institute earns some income. Services such rendered by the Institute under its project activities are subject to service tax.
Accordingly, the Institute is registered for this services under the Act. For the first time it has paid service tax out of service tax earned on its project activities for the month of March 2008 after its registration. As required under the Act it has also filed return in April 2008 for the first half year period. """"No input tax credit was however taken so far.Though it paid Rs.20,000 as service tax on certain services (security, telephone, housekeeping, AMC etc.) availed by the Institute during 2007-08."""
On the other hand, Institute pays service tax - telephone bills, Security services, AMC contracts, Housekeeping services etc. Such services on which tax is paid cannot be clearly segregated as to relating to
(i)the Institute activities which is exempted from any service tax (ii) project activities of the Institute (which is subject to service tax)
Problem:
Now in the month of July 2008 the Institute has further earned service tax (say Rs.50,000)on its project activities and it is required to be deposited by 07-08-2008. But now Institute wants to avail input service tax credit.
Please clarify
1. Whether the Institute can avail of input credit to the extent of 20% (Rs. 10,000)of Rs.50,000 service tax payable in August 2008 by a. taking input credit from the service tax paid (say Rs. 8,000) from April 2008 to July 2008 on common services (telephone, security, housekeeping,AMC etc.) b. taking input credit of balance Rs.2,000 (i.e.Service tax payable in August 2008 Rs.50,000 minus Rs.10, 000- {Rs.8,000 as per 'a' above and balance Rs.2000 from 2007-08) from the service tax paid (Rs.20,000)during 2007-08.
2. For availaing 20% input credit, What register/records are to be maintained. Please indicate under which section it is specified.
3.What is procedure for assessment.What is to be done for this?
4. Whether the institute can avail input credit of more than 20%. Please specify the section/ clause of the ACT and under what terms and conditions
From 01.04.08 the concept of input credit of 20% has been discontinued. Only the input service tax credit pertaining to output service can be availed.
So if your liability on output services is Rs.50,000 please check the input services involved and the service tax incurred on those services and deduct the same.
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