which ratio should take for distributing service tax credit through ISD.

[Asked by Guest]

Res. Sir,

we are manufacturer and having more than 3 excisable units ...we are receiving service tax credit invoices in the name of Head Office Address ..if i want to distribute this service in all excisable units so

let me know that which ratio should consider while i am distributing service ..

for example in july-2014 i want to take service tax credit which are booked in Head office through ISD so which ratio will be considered ?

[YAGAY and SUN]

Dear Manan,

• Rule 7 of the CENVAT Credit Rules, 2004, provides for the manner of distribution of common input service credit by the Input Service Distributor. Rule 7 (d) was amended to provide for distribution of common input service credit among all units in their turnover ratio of the relevant period.
• It clarifies that the allows distribution of input service credit to all units (which are operational in the current year) in the ratio of their turnover of the previous year/previous quarter as the case may be. No need to prove that the services are used for respective unit.

Please read Rule 7 thoroughly before taking any action for distributing the CENVAT credit on Input Services.

This is for your kind information.

Regards

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[Mahir S]

Yes, and further, vide recent Circular No. 178/4/2014 – ST dated 11.07.2014, clarification for distribution of common input service credit under rule 7(d) of the Cenvat Credit Rules, 2004 has been provided.

AI Summary

Distribution of common input service credit must follow turnover ratio of units for allocation, without proving specific use.
Common input service credit must be apportioned by the Input Service Distributor to all units operational in the current year in the ratio of their turnover of the relevant prior period (previous year or previous quarter). There is no requirement to prove that the services were specifically used by each receiving unit. A departmental clarification has been issued on the application of this distribution rule.