Set off on Service Tax.
This query is : Resolved
04 November 2009
Can we obtain set off on Output Service Tax against Input Excise duty??? If yes, kindly specify the Schedule & Clause No.
Rgds.
Rgds.
04 November 2009
As per Rule 3 of Cenvat Credit Rules, 2004 provides that a provider of taxable service shall be allowed to take Cenvat Credit for :
Central Excise Duty
Education cess and Secondary and higher education cess on excisable goods etc.
Central Excise Duty
Education cess and Secondary and higher education cess on excisable goods etc.
04 November 2009
Agree with expert
06 January 2010
Can we obtain set off, if we are trader & service provider and not a manufacturer?
25 July 2025
Set-off of Output Service Tax against Input Excise Duty
The query about whether a service provider can set off output Service Tax against input Excise Duty is governed by the Cenvat Credit Rules, 2004 and the provisions under the Service Tax Act. Here's a detailed answer to your question:
1. Cenvat Credit Rules, 2004:
The Cenvat Credit Rules allow registered manufacturers and service providers to claim input tax credit on the taxes paid on inputs, capital goods, and input services used in the course of business.
As per Rule 3 of the Cenvat Credit Rules, 2004, the following are eligible for Cenvat credit:
Central Excise Duty paid on excisable goods.
Service Tax paid on input services.
Cesses (such as Education Cess and Secondary Higher Education Cess).
2. Can Service Tax (Output) be Set-off against Excise Duty (Input)?
No, Service Tax (output) cannot be set off against Excise Duty (input) under the Cenvat Credit Rules.
The reason for this is that Service Tax is an indirect tax on services, while Excise Duty is levied on goods. Both fall under separate tax categories — Service Tax and Excise Duty — and they are not interchangeable for set-off purposes.
For instance, a service provider may claim Cenvat credit on input service tax (i.e., service tax paid on services used to provide their own services), but they cannot set off output Service Tax against excise duties paid on goods. Similarly, manufacturers can claim Cenvat credit on excise duty paid on inputs and capital goods used to manufacture goods, but they cannot set off service tax paid on services.
3. Set-off Eligibility for Traders and Service Providers:
Even if you are a trader and a service provider, you may be eligible to claim Cenvat credit on certain taxes paid under the Cenvat Credit Rules. However, the rules are clear that:
As a service provider, you can take credit of the Service Tax paid on input services used to provide output services.
As a trader, you can claim Cenvat credit of Excise Duty paid on goods (if you are registered as a dealer under the Central Excise Act), but you cannot set off Service Tax against Excise Duty.
So, as a trader and service provider, if you are not a manufacturer, the credit mechanism for excise duty and service tax would apply to the respective areas:
Service Tax: Credit of input service tax used in your service provision.
Excise Duty: Credit of excise duty on goods you purchase as part of your trading activity.
4. Relevant Clause from Cenvat Credit Rules:
Rule 3(1): The Cenvat Credit can be utilized against the duty on excisable goods (Central Excise Duty) and service tax on output services. But these are treated separately, and cross-set off is not allowed.
Rule 3(4): Specifies the rules for credit utilization (service tax can only be adjusted against service tax liabilities and excise duties can only be adjusted against excise liabilities).
Summary:
No, output Service Tax cannot be set off against input Excise Duty. They are separate tax categories under the law.
Service providers can claim Cenvat credit on input services (Service Tax paid on services received for business purposes), and traders can claim Cenvat credit on excise duties on goods (if registered).
Manufacturers and service providers are allowed to claim set-off only in their respective areas — Service Tax on output services can only be set off against Service Tax input, and Excise Duty can only be set off against excise duties.
The query about whether a service provider can set off output Service Tax against input Excise Duty is governed by the Cenvat Credit Rules, 2004 and the provisions under the Service Tax Act. Here's a detailed answer to your question:
1. Cenvat Credit Rules, 2004:
The Cenvat Credit Rules allow registered manufacturers and service providers to claim input tax credit on the taxes paid on inputs, capital goods, and input services used in the course of business.
As per Rule 3 of the Cenvat Credit Rules, 2004, the following are eligible for Cenvat credit:
Central Excise Duty paid on excisable goods.
Service Tax paid on input services.
Cesses (such as Education Cess and Secondary Higher Education Cess).
2. Can Service Tax (Output) be Set-off against Excise Duty (Input)?
No, Service Tax (output) cannot be set off against Excise Duty (input) under the Cenvat Credit Rules.
The reason for this is that Service Tax is an indirect tax on services, while Excise Duty is levied on goods. Both fall under separate tax categories — Service Tax and Excise Duty — and they are not interchangeable for set-off purposes.
For instance, a service provider may claim Cenvat credit on input service tax (i.e., service tax paid on services used to provide their own services), but they cannot set off output Service Tax against excise duties paid on goods. Similarly, manufacturers can claim Cenvat credit on excise duty paid on inputs and capital goods used to manufacture goods, but they cannot set off service tax paid on services.
3. Set-off Eligibility for Traders and Service Providers:
Even if you are a trader and a service provider, you may be eligible to claim Cenvat credit on certain taxes paid under the Cenvat Credit Rules. However, the rules are clear that:
As a service provider, you can take credit of the Service Tax paid on input services used to provide output services.
As a trader, you can claim Cenvat credit of Excise Duty paid on goods (if you are registered as a dealer under the Central Excise Act), but you cannot set off Service Tax against Excise Duty.
So, as a trader and service provider, if you are not a manufacturer, the credit mechanism for excise duty and service tax would apply to the respective areas:
Service Tax: Credit of input service tax used in your service provision.
Excise Duty: Credit of excise duty on goods you purchase as part of your trading activity.
4. Relevant Clause from Cenvat Credit Rules:
Rule 3(1): The Cenvat Credit can be utilized against the duty on excisable goods (Central Excise Duty) and service tax on output services. But these are treated separately, and cross-set off is not allowed.
Rule 3(4): Specifies the rules for credit utilization (service tax can only be adjusted against service tax liabilities and excise duties can only be adjusted against excise liabilities).
Summary:
No, output Service Tax cannot be set off against input Excise Duty. They are separate tax categories under the law.
Service providers can claim Cenvat credit on input services (Service Tax paid on services received for business purposes), and traders can claim Cenvat credit on excise duties on goods (if registered).
Manufacturers and service providers are allowed to claim set-off only in their respective areas — Service Tax on output services can only be set off against Service Tax input, and Excise Duty can only be set off against excise duties.
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