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CENVAT credit on input services after budget amendment

Saroj Rout (CA FINAL) (120 Points)

15 April 2011

After amendment in budget CENVAT credit has been disallowed on certain input services .Any one Please list out these services and also state w.e f which date it will bw applicable.

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3 Replies

krishna iyer (Sr.Finance Manager) (197 Points)
Replied 17 April 2011

Kindly clarify on these issues also.

we are a manufacturer producing dutiable and exempted goods and receives various input services .

Now exempted services cover services on which service provider has opted for abatement benefit.

as a service recipient, can we take cenvat credit on input services (for which service provider has opted abatement benefit). If not, this is unjust , basic principle of cenvat credit is you pay by one hand and take credit by another hand and there is no cascading effect of taxes.

Going by the principle of abatement benefit leading to exempted service, whether credit for GTA paid by service receiver will be hit, since GTA, service tax is paid for 25% of freight.

kindly clarify

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 17 April 2011

Originally posted by : krishna iyer
	Kindly clarify on these issues also. we are a manufacturer producing dutiable and exempted goods and receives various input services . Now exempted services cover services on which service provider has opted for abatement benefit. as a service recipient, can we take cenvat credit on input services (for which service provider has opted abatement benefit). If not, this is unjust , basic principle of cenvat credit is you pay by one hand and take credit by another hand and there is no cascading effect of taxes. Going by the principle of abatement benefit leading to exempted service, whether credit for GTA paid by service receiver will be hit, since GTA, service tax is paid for 25% of freight. kindly clarify

The bar on abatement is that the assesee who avails abatement can not take input credit, but the receipent of the service can avail input credit on amount after abatement.

GTA services availed on incward entry or outward entry upto point of sale is only permitted. any GTA on outward carrige would not be taken as input credit, if the goods are sold at factory gate.

Pinky Agarwal (Chartered Accountant) (426 Points)
Replied 18 April 2011

Amended definition of input service is given below :

(l) “input service” means any service, -

(i) used by a provider of taxable service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,

and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services,-

(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-

(a) construction of a building or a civil structure or a part thereof; or

(b) laying of foundation or making of structures for support of capital goods,

except for the provision of one or more of the specified services; or

(B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or

(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;