S.t on reverse charge on cisf service

Govt. vide Service Tax notification dated 36/2012 dated 20/6/12 and 30/2012 dated 20/06/12 , have brought support service rendered by government (i.e. service rendered by CISF to Industrial Units) under the reverse charge mechanism of taxation.

There are three Industrial Manufacturing Unit at the same place all having separate Service Tax Registration Number. Previously payments to CISF as per agreement were made only from one unit for all the units and the same is being adjusted in the books of all the units.

After the issuance of the above notification, It is proposed to Service Tax by the respective units under reverse charge mechanism on the amount of service received by CISF, but payment to CISF for service rendered would be made by the one unit for all the units. However, CISF would be raising invoices in the name of different units.

In these circumstances, is it possible to claim cenvat benefit by different unit on the service tax paid on the services rendered by CISF to different units?

Please better understanding and claiming cenvat credit, refer the CENVAT CREDIT RULES (As on 01.07.2012)

Manner of distribution of credit by Inpur service Distributor:

The input service distributor may distribute the cenvat credit on the service tax paid on the input service to its manufacturing units or units providing output service subject to following conditions:

(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; or

(b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed.

(d) Credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units to which the service relates during the same period.”

Explanation 1.- For the purposes of this rule, ―unit includes the premises of a provider of output service and the premises of a manufacturer including the factory, whether registered or otherwise.

Explanation 2.- For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5.

“Explanation 3. - (a) The relevant period shall be the month previous to the month during which the CENVAT credit is distributed.

(b) In case if any of its unit pays tax or duty on quarterly basis as provided in rule 6 of Service Tax Rules, 1994 or rule 8 of Central Excise Rules, 2002 then the relevant period shall be the quarter previous to the quarter during which the CENVAT credit is distributed.

(c) In case of an assessee who does not have any total turnover in the said period, the input service distributor shall distribute any credit only after the end of such relevant period wherein the total turnover of its units is available.

With the introduction of two new conditions, distribution of CENVAT credit by Input service distributor has become very difficult because

1. A separate record is required to be maintained for services which are specifically used for providing a particular unit.

2. For distribution of credit, turnover of the units is required to be considered. It is very difficult to ascertain the turnover of the units each time before distribution of CENVAT credit.

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