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Service Tax on capital goods

Arihant (Business) (207 Points)

10 May 2011

Whether credit of service tax paid on capital goods will be allowed 100% in the same year or it will be bifurcated as 50% in 2 years ?

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23 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 10 May 2011

capital goods and service tax?

please repost your query with more details

Arihant (Business) (207 Points)
Replied 10 May 2011

Service Tax is paid on some techinal services related to installtion of capital goods which is charged in invoice.

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 10 May 2011

Either excise duty on capital goods used in manufacture of excisable goods/ used for provision of taxable services. Similarly the service tax on installation services of such eligible goods wouldbe available.

Nayan Das (ACCOUNTS MANAGER) (981 Points)
Replied 10 May 2011

50% current year and another 50% next financial year year

chamatkaribaba (Practicing Indirect Tax) (97 Points)
Replied 11 May 2011

Service tax need not be paid on Capital Goods. We are required to pay excise duty if they are domestically procured and if imported, the duties applicable are Basic Customs Duty, CVD, SAD and cess.

In these cases, the cenvat credit of ED, CVD, and SAD can be taken. The vailment rules say that it can not be more than 50% in first year.

In case of ervice tax paid on installation, erection and commissioing or any other services in relation to capital goods, cenvat credit can be availed of such service tax that has been collected by service recipient. Whole 100% cenvat credit can be availed in a single year- first year itself.

Arun Kumar Singh (GST Advocate) (15188 Points)
Replied 11 May 2011

You can take 100% cenvat credit of service tax paid on capital goods for installation of services under erection, commissioning and installation service.

Nayan Das (ACCOUNTS MANAGER) (981 Points)
Replied 11 May 2011

mr. arun you are wrong,

50% current year and another 50% next financial year year , this is Service tax rules

chamatkaribaba (Practicing Indirect Tax) (97 Points)
Replied 11 May 2011

Mr. Nayan, Can you please quote/reproduce which Rules talk of what you have said. I think we are not aware of any such rules relating to availment of cenvat credit of service taxes paid on installation of Capital Goods.

However, there is no doubt that there is no cap on the availment of cenvat credit on service tax paid and you can avail 100% cenvat credit in a single year.

Arun Kumar Singh (GST Advocate) (15188 Points)
Replied 11 May 2011

Mr. Nayan, if you are right then please quote service tax rules and procedure.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 11 May 2011

There is no separate cenvat credit rules for service tax, Cenvat credit rules 2004 which are aplicable on Excise is also applicable to service tax.

(Guest)

It is still not clear.

ALso read https://www.facebook.com/gst.india

Arun Kumar Singh (GST Advocate) (15188 Points)
Replied 12 May 2011

Dear Mr. Sharma,

We know that cenvat credit rules, 2004 which are applicable on excise and service tax also. Cenvat credit on capital goods and cenvat credit on installation of capital good is deferent entity. Capital goods is a input and service tax paid on installation of capital goods is a input services. Cenvat credit shall be allowed 100% on the input services.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 12 May 2011

@ Arun

read the 1st post, of the thread

if the person is not interested to account the things properly, what the members can do?

service provided for capital goods is expenses to be claimed in P/L and 100% credit to be availed on payment basis, but he capitalized the service also, which is not at all meet any norms.

once capitalized it should be added at par with capital goods and loose the identity of service, now its question to department that whether they will allow service tax credit as goods or not.

Nayan Das (ACCOUNTS MANAGER) (981 Points)
Replied 12 May 2011

Dear Mr. Sharma,

I agree wth you, capital goods is expenses to be claimed in P/L and 100% credit to be availed on payment basis. But this service tax credit utilised 50% this year and raised 50% used next financial year.