We are launching a service = a pateneted technique to harvest rainwater, wherein we will be billing the Franchsiees for two items: i.e. (1) Royalty for patent for per unit structure = Rs. 8000 on which Service Tax is chargeable @ 10.3%; (2) A special PVC Sheet for per unit structure =Rs. 2500 on which MVAT is chargealbe @ 4%.
We are purchasing PVC Sheet on which Excise Duty+ Ed. Cess+ Sec Ed Cess is paid.
Now the query is: Whether the Excise Duty paid on this purchase can be used for set-off against Service Tax payable on the Royalty ??
We are launching a service = a pateneted technique to harvest rainwater, wherein we will be billing the Franchsiees for two items: i.e. (1) Royalty for patent for per unit structure = Rs. 8000 on which Service Tax is chargeable @ 10.3%; (2) A special PVC Sheet for per unit structure =Rs. 2500 on which MVAT is chargealbe @ 4%.
We are purchasing PVC Sheet on which Excise Duty+ Ed. Cess+ Sec Ed Cess is paid.
Dear Sanjay,
Where the PVC sheet is used in provding the service it would be eligible for input credit. The value of the sheet should also form part of the value of the royalty. If the sheet cost is recovered separately then the same would nto be eligible.
Now the query is: Whether the Excise Duty paid on this purchase can be used for set-off against Service Tax payable on the Royalty ??
The deffinition of Input Goods states- All goods except LDO, HSD, Petrol and Motor car, Used for Providing Ouput Service.
Now if that sheet is used for providing ur service only then you can take credit of ED paid on Sheets.
and as ur service is for providing anything for which you are charging Royalty, it can not be said that the goods are used for providing output service.
However, if you can prove that without supplying these sheets the services can not be rendered then it is eligible as input and eligible for Cenvat Credit.
To make the query more clear, the pvt ltd company in question has taken rights/ sub-license from the individual ( who is also the promoter of this pvtl ltd co) who is inventor and registered owner of the patent of a unique technique to harvest rainwater. The implementation of techique requires one material component that is a special made PVC Sheet. This special PVC Sheet is a part of the design of the technique without which the structure made by use of this patented technique is incomplete.
The company will be paying Royalty to the individual=patent holder on which Input Service Tax is chargeable. Secondly the company will be buying this Special PVC Sheet on which Input Excise Duty is chargeable.
Now the company is appointing Franchisees at various places. The Franchisees will do the actual execution of Work / structure by using the patent technique and the special PVC Sheet.
The Company will be billing the Franchisee by two seperate bills or a single bill for two items i.e (1) Royalty for patent for per unit structure = Rs. 8000 on which Service Tax is chargeable @ 10.3%; (2) A special PVC Sheet for per unit structure =Rs. 2500 on which MVAT is chargealbe @ 4%.
Now the query is: Whether the Excise Duty paid on this purchase can be used for set-off against Service Tax payable on the Royalty ??
I hope the detail given will help the friend/ experts to give a more reasoned opinion.
Thanks in advance once again. Awaiting for the replies.
The Hospital purchased equipments for providing services to the patients, can be eligible for credit of excise duty paid on purchase towards service tax. also purchase certian medicines and re agents for providing services can also eligible for cenvat cretit against service tax payable to TPA
Can anyone of the Expert friends provide any notification / circular / rule reference for taking set-off of Input Excise Duty on Purchases against Output Service Tax on Service provided.
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