service tax credit adjustment -reg

[Ramakrishnan Seshadri]

Dear Sir,

We are clearing as such removal goods to our vendor for manufacturing components of our finished products. We had a doubt. can we adjust the service tax credit available for this removal.

Please clarify with case laws

Thanks & Regards,

S.Ramakrishnan

[Rajagopalan Ranganathan]

Sir,

As per rule 2 (p) of Cenvat Credit Rules, 2004, “output service” means any service provided by a provider of service located in the taxable territory but shall not include a service,-

(1) specified in section 66D of the Finance Act; or

(2) where the whole of service tax is liable to be paid by the recipient of service.

In view of the above if you pay service tax under RCM as consignor, then it is not output service and hence you cannot take credit of service tax paid for removal of inputs as such to your vendor for manufacturing components.

AI Summary

Service Tax Credit Not Allowed for Goods Sent to Vendor Under Rule 2(p), Cenvat Credit Rules, 2004 A participant inquired about the possibility of adjusting service tax credit for goods removed to a vendor for manufacturing components. The response clarified that according to Rule 2(p) of the Cenvat Credit Rules, 2004, 'output service' excludes services where the entire service tax is paid by the recipient. Therefore, if the service tax is paid under Reverse Charge Mechanism (RCM) as consignor, it is not considered an output service, and credit cannot be taken for service tax paid on the removal of inputs to the vendor.