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Service tax input utilisation.

K.Sanu Bhagat (Accounts Enthusiast) (122 Points)

12 July 2016

Hello!

My company spends Rs.10,000 (basic) on advertisement purpose. The Service Tax we pay on that @ 15% is Rs.1,500.

My company also sends goods to its customers through lorry and we pay Service Tax on the freight amount.

My question is: Can the Input Service Tax of Rs.1,500 be set-off with the Service Tax payable on freight amount while calculating the monthly net payable service tax ?

Thanks in advance for your sincere efforts.

Best Regards,

Sanu Bhagat

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11 Replies

Parihar Gopal (Corporate Taxation ) (392 Points)
Replied 12 July 2016

Yes you can adjust the same in your output tax.

2 Like

K.Sanu Bhagat (Accounts Enthusiast) (122 Points)
Replied 12 July 2016

Thank you so much Mr. Parihar.

Also, what about the service tax we are charged on Mobile & Telephone expenses, consultancy services, etc., billed in the name of the Company.

Can those service tax be also considered as Input Service Tax for adjusting with output service tax?

Thanks in advance for your sincere effort.

Best Regards,

Sanu Bhagat

1 Like

Shubham Gupta (Business Consultants) (2077 Points)
Replied 12 July 2016

do you have to pay service tax on frieght under REVERSE CHARGE??

1 Like

Vipul Mittal (Consultant - Indirect Tax) (97 Points)
Replied 12 July 2016

CENVAT credit can not be utilized for discharging service tax liability under reverse charge mechanism (RCM). From your query it apprears that your company is the recipient of freight service and discharging service tax under RCM and hence, CENVAT credit of advertisement service can not be utilized for payment of service tax on GTA.

You may utilize the CENVAT credit against your excise duty liability or service tax liability (as a output service provider). Further, ST rate of 15% comprises of 3 components i.e. 14% ST + 0.5% SBC + 0.5% KKC. CENVAT credit of SBC is not available and CENVAT credit of KKC is available to output service provider only.

Hope the above clarifies.

2 Like

K.Sanu Bhagat (Accounts Enthusiast) (122 Points)
Replied 12 July 2016

@ Mr. Shubham,

Yes, its paid under Reverse Charge.

1 Like

K.Sanu Bhagat (Accounts Enthusiast) (122 Points)
Replied 12 July 2016

@ Mr. Vipul,

Thank you so much for a detailed explaination.

So, If the comapny manufactures goods, then the payable excise duty can be adjusted with the Input Service Tax received on Advertisement expenses?

Vipul Mittal (Consultant - Indirect Tax) (97 Points)
Replied 12 July 2016

Yes. Advertisement expense is an eligible input service. Please refer rule 2(l) of CENVAT credit rules, 2004.

2 Like

Tarunjay (GM) (42 Points)
Replied 12 July 2016

Service Tax to be paid on reverse charge machanism can be adjusted against CENVAT credit hence to be paid in cash. however, the same is eligible input and can be adjusted against excise duty. so, no loss technically.

1 Like

Tarunjay (GM) (42 Points)
Replied 12 July 2016

pls read can't be. Typo error

Tarunjay (GM) (42 Points)
Replied 12 July 2016

Tarunjay 12 July 2016Service Tax to be paid on reverse charge machanism cannot be adjusted against CENVAT credit hence to be paid in cash. however, the same is eligible input and can be adjusted against excise duty. so, no loss technically.

1 Like

Anandakrishnan V, Chengannur (Sr.Accountant ) (52 Points)
Replied 14 July 2016

UNDER THE MECHANISM OF REVERSE TAX , AVAILING INPUT TAX CREDIT IS NOT ALLOWABLEUNDER THE MECHANISM OF REVERSE TAX , AVAILING INPUT TAX CREDIT IS NOT ALLOWABLE