gst in india  


VAT Service Tax India
Service Tax New Delhi
Central Excise and Service Tax
Service Tax Cenvat
Service Tax Exemption
Service Tax Tribunal

Justification of GST
Preparation for GST
Purchase Tax of GST
GST Rate Structure
VAT at the Central & State level
Goods & Services Tax Model For India
Central and State Taxes under GST
Special Industrial Area Scheme
Inter-State Transactions of Goods
Rules for CGST and SGST
Implementation of GST

Service Tax Cenvat

Based on the value of taxable services the main purpose for providing the Cenvat Credit is to exempt rebate from service tax. Proportionate Cenvat Credit should be provided for the payable service tax after eliminating the value of goods and materials. Here service tax is computed on the value of services (after ignoring value of goods and materials involved).

Credit of service tax is availed under Cenvat Credit Rules, 2004. In order to find out whether manufacturer can obtain the credit of service tax paid on outward freight these rules should be scrutinized carefully. Rule 3(ix) of the Cenvat Credit Rules, 2004.

RULE 3. CENVAT credit — (1) A manufacturer or producer of final products or a provider of taxable service is allowable to take credit (hereinafter referred to as the CENVAT credit) of - (ix) the service tax leviable under section 66 of the Finance Act; paid on -

(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.

Thus a manufacture of final product is eligible to take credit of service tax paid on any “input service”.

Input service has been defined as, 2(l). “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 the manufacture of final products and clearance of final products from the place of removal, and contains services exercised for setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, business related activities 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 4 of the Cenvat Credit Rules, 2004 recommends the conditions for allowing Cenvat credit. For taking credit of input service, it provides that: -Services of Associated Enterprise are eligible for service tax if only a debit entry or credit entry is made in the books of accounts. But the sub-rule (7) of Rule 4 of Cenvat Credit Rules, 2004 explains that credit of input service is allowed when payment is released of value of input service and the service tax as indicated in invoice, bill or challan is made. The credit of service tax paid on book adjustments is not allowable until and unless the book adjustments are settled off via payment. Thus, an irregularity is raised where the service recipient can’t get Cenvat credit although service tax is paid on the service of associated enterprise availed by him.

Services of Associated Enterprise are eligible for service tax if only a debit entry or credit entry is made in the books of accounts. But the sub-rule (7) of Rule 4 of Cenvat Credit Rules, 2004 explains that credit of input service is allowed when payment is released of value of input service and the service tax as indicated in invoice, bill or challan is made. The credit of service tax paid on book adjustments is not allowable until and unless the book adjustments are settled off via payment. Thus, an irregularity is raised where the service recipient can’t get Cenvat credit although service tax is paid on the service of associated enterprise availed by him.

The Cenvat Credit Rules narrate ‘input services’ as services used, directly or indirectly, concerning the manufacture of excisable goods. The definition includes other services used in regarding setting up, modernisation and renovation of a factory, advertisement, sales promotion and market research. It also contains business related services like accounting, auditing, financing, share registry, computer networking, security, coaching and training of employees. Consequently, it is found that almost all services exercised by a manufacturer of excisable goods would meet the criteria as input services, and the service tax paid would be utilized as Cenvat credit. So you may avail credit of the tax paid on ancillary services falling in the definition of input services and subject to other conditions.

 

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