Service tax

Dear Swetha,

Value Added Tax ('VAT') and Service Tax are two different forms of taxes altogether.

CENVAT credit available on the input and capital goods can only be set off against the final product which is sold to the retailers in your case. Service Tax is only available on the services provided and not on the goods sold.

So you will not be able to set off the input tax credit available w.r.t VAT against Service Tax.

Regards,

Jinay Savla

Dear Swetha,

Value Added Tax ('VAT') and Service Tax are two different forms of taxes altogether.

CENVAT credit available on the input and capital goods can only be set off against the final product which is sold to the retailers in your case. Service Tax is only available on the services provided and not on the goods sold.

So you will not be able to set off the input tax credit available w.r.t VAT against Service Tax.

Regards,

Jinay Savla

Dear Swetha,

Value Added Tax ('VAT') and Service Tax are two different forms of taxes altogether.

CENVAT credit available on the input and capital goods can only be set off against the final product which is sold to the retailers in your case. Service Tax is only available on the services provided and not on the goods sold.

So you will not be able to set off the input tax credit available w.r.t VAT against Service Tax.

Regards,

Jinay Savla

Dear Jinay,

I agree.  But the CENVAT credit available on the input and capital goods mentioned here is Central Excise Duty and not VAT.

Please refer to Rule 3 of Cenvat Credit Rules as amended, relevant part produced below for reference:

3. CENVAT credit.  -

(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of -

(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;

(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;

(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978 ( 40 of 1978);

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ( 58 of 1957);

(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);

(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);

(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
[ Substituted vide Notification  No. 27/2007-Central Excise (N.T.) dated 12-05-2007 ]

(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) (vi) and (via); [Substituted vide Notification  No. 10/2007-Central Excise (N.T.) dated 01-03-2007 ]

(viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, [OMITTED- as substituted by clause 72 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931 (16 of 1931), the force of law ]:

(In clause (viia), portion beginning with the words and figures "as substituted by clause 72" and ending with the words "the force of law" has been omitted vide Notification No.  22/2005 -Central Excise (N.T.), dated 13/05/2005)

Provided that a provider of taxable service shall not be eligible to take credit of such additional duty;

(Clause (viia) has been inserted vide  Notification No. 13/2005 - Central Excise (N.T.), dated  01/03/2005)

(viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);

(ix) the service tax leviable under section 66 of the Finance Act; and

(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004),

“(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007  (22 of 2007); and

(xi) the additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005 )
 

(In clause (xi), the words and figures "section 85 of Finance Act, 2005 (18 of 2005 )" has been substituted vide Notification No.  22/2005 -Central Excise (N.T.), dated 13/05/2005)

(Clause (xi) has been inserted vide  Notification No. 13/2005 - Central Excise (N.T.), dated  01/03/2005)

paid on-

(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and

(ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004,

(4) The CENVAT credit may be utilized for payment of –

(a) any duty of excise on any final product; or

(b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or

(c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or

(d) an amount under sub rule (2) of rule 16 of Central Excise Rules, 2002; or

(e) service tax on any output service:
 

Hope now it is clear that credit utilisation is possible in your case.
 

Ours is a company renting out immovable facilities to fair and other social event organisers.

Our question is whether the Input Service tax paid on construction of immovable property used for renting out as above is eligible  for setting off as input tax credit for the purpose of payment of output service tax.

Mr. ujjwal,

The new definition of input services, vide notification number 3/2011-CE(NT) dated 01.03.2011, includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, but excludes services,-
(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-
(a) construction of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods,
except for the provision of one or more of the specified services;

Hence, where service tax is paid on services specified above, they are excluded & credit is not available.

Please mention the category of service on which you have paid service tax.