Input Service tax credit

Queries 641 views 2 replies

inderjeet

Head - Accounts & taxation

28 Points Posted on 02 March 2010

A company has been incorporated for the purpose of doing any particular line of business in July'09 but the company has not started its actual operations till date due to some delay in regulatory approvals.

However the comapny has taken propoerty on rent and is also taking some other services on which Service tax is being paid.

My question is whether the company can claim input service tax on such service tax payments made during the current year. ( Ofcourse as business is not started, the input credit needs tobe cariied over to next years for availment.)

Please confirm .

Replies (2)

CA Pranjal Joshi

331 Points Posted on 03 March 2010

Hi,

If the service is the taxable service and small scale service providers exemption is not availed, then in my opinion the cenvat credit can be taken.

Amir

Learner

4016 Points Posted on 03 March 2010

Dear Inderjeet Sir,

Agree with Pranjal sir.

Credit of service tax paid on Input services is allowed on one condition that the service is used directly or indirectly for providing "output service(taxable) or "finished goods(dutiable)" (There are some exceptions to this in case of services of generic nature like architectural services, etc as defined in Rules)

Hence if ur finished product is not dutiable then Credit will not be allowed. Further in case of both taxable as well as exempt goods/services - Notional dissallowance shall be required if separate accounts are not kept.

So just check the above condition as well.........