Service Tax Payable on Sacrifice Amount of Term Loan -reg

[vinay wakde]

Our company had taken loan from Bank for new project. We have now prepaid the outstanding term loan, payment of sacrifice amount etc. to the Bank. The bank has charged Service tax on other payment i.e. sanction fees of term loan. Kindly let us know whether we are eligible to take CENVAT credit i.e. Input service to the extent of Service Tax paid, as we are manufacturer as well as service provider. Kindly let us know what is the duty paying document for taking credit.

Regards,

VINAY

[Rajagopalan Ranganathan]

Sir,

If the loan is obtained for establishing your factory or for procuring raw material, capital goods which will further used in manufacturing activity then the service received from bank may be treated as input service.

Similarly if the loan obtained is used for providing output service then also you can avail the credit. Otherwise you are not eligible.

[Mahir S]

Yes, credit can be availed for such input credit.

However, after the deletion of word 'Setting Up" from the definition of input service credit, such credit may be disallowed by the department, and hence advisable not to avail such credit.

AI Summary

Company Queries CENVAT Credit Eligibility on Service Tax for Prepaid Loan Fees Amid Definition Changes A company prepaid its term loan and faced service tax charges on the sanction fees. They inquired about eligibility for CENVAT credit on the service tax paid, as they function as both a manufacturer and service provider. One respondent indicated that credit could be availed if the loan was used for manufacturing or providing output services. Another respondent confirmed the possibility of availing credit but cautioned that recent changes in the definition of input service might lead to disallowance, advising against claiming such credit.