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Frequently Asked Questions on Service Tax

CENVAT Credit

What are the provisions for availment of CENVAT credit?
    A provider of taxable service shall be allowed to take credit of :
  i) The duty of excise specified in the First and Second Schedule to the Excise Tariff Act, leviable under the Excise Act;;
  ii) The Additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978;
  iii) The Additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;
  iv) The NCCD leviable under Section 136 of the Finance Act, 2001;
  v) The Education Cess on excisable goods leviable under Section 91 read with Section 95 of the Finance (No.2) Act, 2004.
  vi) The Additional duty leviable under Section 3 of the Customs Tariff Act;
  vii) The additional duty of excise leviable under Section 157of the Finance Act, 2003
  viii) The Service Tax leviable under Section 66 of the Finance Act; and
  ix) The Education Cess on taxable services leviable under Section 91 read with Section 95 of the Finance (No.2) Act, 2004.
    a) any input or capital goods received in the premises of the provider of output service on or after 10th September, 2004; and
    b) any input service received by the provider of output services on or after 10th September, 2004.

CENVAT credit shall be allowed after payment is made of the value of taxable services and the service tax paid or payable.

  It is important to note that input service means any service used by a provider of taxable service for providing an output service, or used by the manufacturer, whether directly or indirectly, in or in relation to manufacture of final products and clearances of final products from the place of removal and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of a provider of output service or an office relating to such factory or premises, advertisement or sales promotions, market research, storage upto the place of removal, procurement of inputs, activities relating to business such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal. [Rule 2 (l) of CENVAT Credit Rules, 2004 refers].
What are the provisions for utilization of CENVAT credit?
 

The CENVAT credit may be utilized for payment of service tax on any output service subject to restrictions contained in the CENVAT Credit Rules.

Provided that while paying service tax, the CENVAT credit shall be utilized ony to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of Service Tax relating to that month or quarter, as the case may be.

In case the assessee provides both taxable and non-taxable services and opts not to maintain separate sets of accounts in respect of both the kinds of services then he may utilize CENVAT Credit only to the extent of 20% of the amount of Service Tax payable on taxable out put service and the balance 80% of the Service Tax so payable shall be paid by him in cash through TR-6 challan.

Whether any documents are prescribed on which CENVAT credit can be availed?
 

In case of inputs or capital goods, invoice issued by the manufacturer, importer, first and second stage dealers, bill of entry, certificate issued by the Appraiser of Customs in case of goods imported through a Foreign Post Office.

In case of input service, invoice/bill/Challan issued on or after 10.09.04 by the service provider or the input service distributor or Challan issued by the person liable to pay tax under Rule-2(1) (d) (iii), 2 (1) (d) (iv) and 2(1) (d) (v) of the Service Tax Rules, 1994.

Who is an input service distributor?
 

Input Service Distributor means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said input services to such manufacturer or producer or provider, as the case may be.

 

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