Service Tax accumulated and set off

[Ashok Chopra]

Respected Forum,

I am multi unit company engaged in the following business:-

1. Manufacturer Exporter of Readymade Garment

2. Manufacturer Exporter of Wooden Furniture

3. Service Provider of Paint Coated on Auto Parts

Name of the company is same like M/s ABC Pvt. Ltd. (Garment Division) , M/s ABC Pvt. (Furniture Division) and M/s ABC Pvt. Ltd. (Coating Division).  Service tax number is one and service tax return is being filed one for all.

A lot of service tax amount is lying balance in return for the payment of Man Power Services, Security Service and Telephones etc. etc.

Now i want to give entire Coating Division on Lease.

I will charge Service Tax of Lease amount from Lessee.

Can i adjust  the amount now charged from Lessee from the outstanding amount of Service Tax in the books? or i should deposit the amount of service tax charged from Lessee

Please guide me accordingly.

 

If there is any notification or clarification, please provide me.

[Aninda Roy]

Dear Mr.Chopra,

What i understood is that you are basically asking, if the service taxes inputs you have on account of payments made for input services can be adjusted against your output tax liability from "renting of immovable property services". You can adjust the inputs availed relating to the services used for your "Coating Division", for example the security services used for that division. There are certain common services, for which input services can always be claimed, please go through Rule 2(1). Moreover, as per  notification 29/2012-ST, the property taxes PAID on such leased property can be adjusted against the gross value of service, clarified through an example below:

Gross value of bills raised - Rs.100

Property taxes paid - Rs15 (relating to the same period for which bills have been raised)

Now service tax is payable on Rs 85(100-15)

Sincerely,

Aninda Sundar Roy

[Rajesh Nathoo]

Dear  Mr.  Ashok,

 You cannot  utilize the accumulated Cenvat Credit on input services prior to the period when you were not rendering any taxable service . Please go though Rule 11 of Cenvat Credit Rules . Taxable event in Service Tax  is redering of Service . You can take the credit  of input services like Security Services , Telephone Bills after the date when when you had given coating division on lease . Regarding  credit on Manpower Services , it clearly does not have any nexus with Leasing Service , so credit of manpower services is not eligible.  You can go for the refund procedures for service tax paid on input service of manpower services  as it is being used for export .

[YAGAY andSUN]

I am in agreement with Mr. Rajesh's reply.

AI Summary

Cenvat credit utilization limited to post leasing taxable liabilities; nexus required and certain input credits are ineligible. Cenvat credit may be applied only against output service liabilities arising after the taxable service is rendered; accumulated credits from periods without taxable services cannot be utilised. Credits with a direct nexus to the leased division (e.g., security, telephone) may be admissible, while manpower services lacking nexus to leasing are ineligible. Property taxes paid may be deducted from the gross value of leasing services when computing the taxable base, and export related input service tax may be recoverable via refund procedures.