Credit of Service tax and Excise duty on Specified 16 services

[Vijay Chitte]

Full credit for Specified 16 services in chepter "credit of Service tax and Excise duty" can we take full credit of specified 16 services which are utilised for both taxble and exempted serivces, if we have not maintained separate account for receipt, consumption and inventory, allthough can we take a credit?

[Surender Gupta]

Full credit is available on 16 services as per rule 6(5) of Cenvat Credit Rules, 2004 provided these are not used exclusively into manufacturing of exempted goods or providing exempted services. However, if these are used for both exempted as well as taxable / excisable goods full credit is available. Even there is no need to keep separate records for this purpose.

1) Assuming an output service provider provides both taxable and non-taxable services. He is taking input service tax credit on all input services consumed both in taxable and non taxable out put service and he is not maintaining separate account for the consumption of such input services in both the categories of output service. 2) With regard to specified categories of input services such as “Security, Repairs and Maintenance, erection and commissioning, audit etc.” there is no restriction either for taking credit or for utilization of such credit. Sub rule (5) of Rule 6 of Cenvat Credit Rules allows full credit on these services since sub rule (5) starts with the word “Notwithstanding anything contained in sub rule (1) to (4). Accordingly, full credit is available for utilisation irrespective of the conditions stipulated in sub rule (1) to (4) 3) However, with regard to other categories of inputs (other than specified) such as telephones, courier etc, though full credit is allowed, credit can be utilized only to the extent of 20% of the amount of tax payable on the out put services. The same can be further explained by way of an illustration given below: a)Credit taken on Specified Categories of inputs such as ‘Security, maintenance etc. Rs. 2,00,000/- b)Credit taken on input services other than specified categories Rs. 5,00,000/- c)Total amount of service tax payable on output services – Rs. 10,00,000/- d)Amount available for utilization from Cenvat credit Account will be Rs. 2,00,000/- (100% credit on specified services) plus Rs. 2,00,000/- (i.e. 20% of Rs. 10,00,000/-) from non specified categories. The total amount comes to Rs. 4,00,000/- e) The balance of Rs. 6,00,000/- is payable by cash through TR6 challan From the above illustration, the output service provider needs to pay Rs. 6,00,000/- by cash after adjusting Rs, 4,00,000/- input tax credit. The balance amount of credit can be carry forward to the next month as opening balance and so on. There is no question of lapse as the restriction is only on utilization and not on taking credit. It is suggested that the output service provider may maintain separate credit account – one for credit on specified categories of input services and the other for non-specified categories of inputs. By S. Gokarnesan Advocate, Chennai 37

AI Summary

Full credit for specified input services available despite mixed use; utilization caps limit other input credit usage.
Full credit of service tax on specified input services under sub rule (5) of the Cenvat Credit Rules is available even when those services are used for both taxable and exempt services without the need for separate records; credits on non specified input services may be taken but their utilisation against output service tax is subject to a utilization cap, with unutilised credit carried forward.