Input service tax distribution under rule 7 cenvat rule 2004

Presuming that you understand the relevance and the importance of a input service distributor, following is the process for distribution of credit:

Distributable credit

The amount of credit to be distributed shall not exceed the amount of cenvat credit availed by input service distributor.

Manner of distribution

1) Credit which is attributable to a service that is wholly consumed in a unit which is engaged in the manufacture of exempted goods shall not be distributed.

2) Credit which is attributable to a service that is wholly consumed in a unit shall be distributed only to that unit.

3) Credit which is attributable to a service that is  consumed in more than one unit shall be distributed pro-rata in the following manner:

Turnover during the relevant period of the concerned unit

Total turnover of all the units which have consumed that service(whether or not manufacturing exempted goods)

Turnover means aggregate value of all clearances including clearances under R-3(5).

Relevant period means the month preceding the month during which cenvat credit is to be distributed. 

In case any unit is paying duty on a quarterly basis,then the above month shall be replaced by a quarter.

In order to distribute credit, an appropriate invoice (as per rule 4A of service tax rules 1994) shall be required to be raised to ensure compliance of rule 9(1) of cenvat credit rules.

Also, ISD shall furnish half yearly returns as per rule 9 of cenvat credit rules.