service tax on banking & other financial services

[raj nadh]

Dear Expert,

We have received an invoice on service charges towards banking and other financial services. Shall I take ST credit on this invoice as we are not registered with banking and other financial services in our service tax registration.

Pls confirm as soon as possible

Anand

[YAGAY and SUN]

Dear Anand,

For availing CENVAT credit of Input services, there are following pre requirements: -

• Service Provider/Recipient must be registered with Service Tax Department;
• Must be providing taxable services or deemed service provider such as under reverse charge etc.
• There must a nexus either with Manufacturing business or Output Service.
• Services received must be input service as mentioned in the CCR Rules, 2004.

In your matter you are registered with ST Department and receiving taxable service which duly falls under Banking and other Financial Services. There is no requirement that service provider for availing input services must have registration for the same services. It is settled legal position that any service which enhance the quality of output service would be treated as Input Service and Credit would be allowed. Hence, you can avail the CENVAT credit on such services. There is no requirement to have one to one correlation.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

AI Summary

Cenvat credit: registered recipients may claim input service credit for banking services if nexus and input-service criteria are met.
Cenvat credit on banking and other financial services can be claimed by a registered service recipient if statutory prerequisites are satisfied: registration with the service tax department; provision of taxable or deemed services; receipt of services qualifying as input services under the rules; and a nexus between the input service and the recipient's output service or manufacturing activity. The service provider need not be registered for the same service, and no one-to-one correlation between input and output services is required.