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pure agent-input credit-urgent

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malli and Nag

111 Points Posted on 11 August 2010

Dear friends

Can Pure agent avail input tax credit on input services .

Eg:X provides Rs.450 lacks of services to B

X acts as pure agent and x satisfy all conditions for pure agent

Total expenditure incurred by x on behalf of B is Rs.4500 lacks

now x got 10% commision on Rs.4500 lacks

In this situation here taxable value only Rs.450 Lacks and the x can take input credit on input services for this out put service .The input service value is included in Rs.4500Lacks

Plese give clarification and give any supporting (if any avilable)

Replies (1)

If X satisfying all the condition as specified in rula 5 of Service tax determination of value rules 2006, then on 4500 lacs there will no service Tax but at he same time Pure Agent cannot avail service tax paid on expense which are suppose to reimburse as per rule 6 of CENVAT credit rules.

- Since, the Service of Rs. 4500 Lacs is considered as “Exempted service” being a service on which nil rate of ST is charged and

- Provider of service i.e. Pure Agent cannot avail CENVAT credit on services which has been used in providing Exempted Service.

Hope above explanation is sufficient for your purpose