Input Credit of Service Tax

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Kamal Jain

FCA

200 Points Joined April 2009

Pls help me know the solution in the light of following facts:

A Ltd incorporated on 1-1-2009 and provided services amounting to Rs 7,50,000 till 31-03-2009
Since Co. was within the monetary limit of Rs 10 Lacs fixed by the govt for small service providers, co did not registered itself under Service Tax.But co had paid service tax on some input services to a service provider say Rs.10,000/-
In the year 2009-10 company provides services for more than 10 Lacs and registered it self under service tax and has a output service tax liability say Rs 20,000/-

My Question is whether company is eligible to claim 10k input service against 20k out put service tax in the above case?

Thanks in advance.

Replies (7)

CA Shilpi Jain

Indirect taxation

155 Points Joined February 2009

Originally posted by :Kamal Jain

Pls help me know the solution in the light of following facts:

A Ltd incorporated on 1-1-2009 and provided services amounting to Rs 7,50,000 till 31-03-2009
Since Co. was within the monetary limit of Rs 10 Lacs fixed by the govt for small service providers, co did not registered itself under Service Tax.But co had paid service tax on some input services to a service provider say Rs.10,000/-
In the year 2009-10 company provides services for more than 10 Lacs and registered it self under service tax and has a output service tax liability say Rs 20,000/-

My Question is whether company is eligible to claim 10k input service against 20k out put service tax in the above case?
Thanks in advance.

The answer is NO.

During the year 2008-09, the co was a small service provider (covered by the 8L limit) and not paying service tax on services provided. As per a notification you cannot claim input credit of the service tax paid on inputs used to provide services not taxable. Hence you cannot avail input credit on the ST paid in the previous which was used to provide services that were not taxable. (this is in relation to previous year)

In the current year, ur providing taxable services and so u can claim the input credit of the ST paid by u in the current year.

Input Services (ST Paid) ----> used to provide output service (covered by ST i.e taxable) only den cenvat credit available.

Input Services (ST Paid) ----> used to provide output service (not covered by ST i.e not taxable) no cenvat credit available.

CA Sk Hasan Ali

Chartered Accountant

37 Points Joined August 2008

Dear Kamal

No, company can not claim such input credit. If company claims such input credit then it has to pay service tax on those exempted service amount with interest and penalty.

For your reference I am attaching the notification below.

Note:– The principal notification No. 6/2005-Service Tax, dated the 1st March, 2005 was published in the Gazette of India, Extraordinary, vide number G.S.R. 140(E), dated the 1st March, 2005 and was last amended vide notification No. 8/2008-Service Tax dated 1st March, 2008.

Notification No. 6/2005-Service Tax New Delhi, dated 1st March, 2005.

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services of aggregate value not exceeding four lakh rupees in any financial year from the whole of the service tax leviable thereon under section 66 of the said Finance Act:

Provided that nothing contained in this notification shall apply to,-

(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or

(ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules,1994.

2. The exemption contained in this notification shall apply subject to the following conditions, namely:-

(i) the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him and such option,once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year;

(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on any input services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to as the said rules), used for providing the said taxable service, for which exemption from payment of service tax under this notification is availed of;

(iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the said rules, on capital goods received in the premises of provider of such taxable service during the period in which the service provider avails exemption from payment of service tax under this notification;

(iv) the provider of taxable service shall avail the CENVAT credit only on such inputs or input services received, on or after the date on which the service provider starts paying service tax, and used for the provision of taxable services for which service tax is payable;

(v) the provider of taxable service who starts availing exemption under this notification shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification;

(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider after deducting the amount referred to in sub-paragraph (v), if any, shall not be utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts availing the exemption under this notification;

(vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services; and

(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed rupees four lakhs in the preceding financial year.

3. For the purposes of determining aggregate value not exceeding four lakh rupees, to avail exemption under this notification, in relation to taxable service provided by a goods transport agency, the payment received towards the gross amount charged by such goods transport agency under section 67 for which the person liable for paying service tax is as specified under subsection (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994, shall not be taken into account.

Explanation.- For the purposes of this notification,-

(A) “brand name” or “trade name” means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person;

(B) “aggregate value not exceeding four lakh rupees” means the sum total of first consecutive payments received during a financial year towards the gross amount, as prescribed under section 67 of the said Finance Act, charged by the service provider towards taxable services till the aggregate amount of such payments is equal to four lakh rupees but does not include payments received towards such gross amount which are exempt from whole of service tax leviable thereon under section 66 of the said Finance Act under any other notification.

4. This notification shall come into force on the 1st day of April, 2005.

[F. No. 334/1/2005-TRU]

(V. Sivasubramanian)

Deputy Secretary to the Government of India

Madhukar N Hiregange

Chartered Accountant

39039 Points Joined September 2008

No the credit for the year under exemption is not available for the next year. The basis is that when no taxable services provided the question of availment of credit does not arise.

SK. MAKSUD

ACCOUNTS MANAGER

40 Points Joined December 2008

Can any of company taken input credit of service tax before registration of service tax?

Input credit taken on expenses without have service tax registration no. or service tax registration number will be come in future?

Madhukar N Hiregange

Chartered Accountant

39039 Points Joined September 2008

In case one is provding taxable services or intends to provide taxable services and has not take the regsitration then the input credits on services used in setting up, used for provding the taxable services ( may not be billed/ completed) and services used for businenss wouldbe eligible even if recived prior to the registration. However if used in provding the exempt services or non taxable services then the credit would not be eligible.

Neha Bathwal

Student

32 Points Joined November 2008

URGENT!

please tell me if input tax credit can be availed on service tax paid for LC Discounted? if yes, what is the % of credit that can be availed?

Jay

Accountant

21 Points Joined January 2011

Dear Sir,

One of my friend's company is in telecom s/w business. They have imported some hardware from outside country and also downloaded software from parent company portal. Currently they do not have records of import as to software import but would like to regularise. They have invoiced the h/w with CST and they would like to invoice software also with CST. Please note while invoicing imported h/w components are clubbed under different category and identified with new name/nomenclature.

Now I would like to know following:

1. Whether H/w invoicing attracts excise duty?

2. Whether S/w invoicing will attract CST & Service tax (since the customer is in different state)

3. What are the steps to be further taken to regularise the above if we have not followed rules under existing laws like central excise, CST, VAT, and Service Tax etc.,

Hope my esteemed members will throw light on this at the earliest.

Warm regards,