Availing input service tax credit for personal expenses

Queries 633 views 2 replies

Sameera

Article assistant

262 Points Joined September 2012

Hello everyone,

I have a doubt regarding service tax. Currently I am doing a statutory audit of a company.

I have an observation i.e. the company bifurcates the telephone charges into two types such as (1) Personal charges for the directors (2) The telephone expenses incurred by the co for its official purposes

But the company is taking credit on the first part also, i.e which the company is recovering from its directors which is purely a nature of personal expense and it does not meet the criteria of input service for providing the output service.

Point to be noted is the invoice is received in the name of the company.

Please confirm me whether the company is eligible to take credit on the portion which the company is recovering fro its directors with reference to rules. The portion recovered is exclusive of service tax.

Please clarify the doubt as soon as possible as we are in the verge of closure of the audit.

Thank you :)

Replies (2)

CA Dipak

achiever

238 Points Joined December 2007

ervice Tax Credit on Mobile Phone Bill allowed:

The Circular No.97 allows Credit on Mobile Phone service and clarifies as under:

“A doubt has been raised regarding admissibility of CENVAT credit on service tax paid in respect of mobile phones. In the Service Tax Credit Rules, 2002, it was prescribed that credit of service tax was admissible only on telephone connection installed in the business premises. A clarification to this effect was also issued vide circular No. 59/8/2003-ST, dated 20.6.2003, in the context of the Service Tax Credit Rules, 2002. However, in the CENVAT Credit Rules, 2004 no such condition has been prescribed. Therefore, w.e.f. 10.9.2004, credit of service tax paid in respect of mobile telephone service is admissible, provided the mobile phone is used for providing output service or used in or in relation to manufacture of finished goods”.

As company is recovering expenses from director it means that it is personal expenses incurred by company for director Hence no credit is availble.