Adjustment of the input service against the liability of output service

[RAJESH MANGAL AGRAWAL]

A Service provider X is registered in consulting Engg service and providing consultancy service. He is entered into a turnkey project whereby he has to supply materials as well as errections & commissioning of it. Till date no regd. made with dept either on Errection Comm. service or work contract service for the turnkey project. in the F.Y. 2008-09 X did not raised any invoice for the output service of Turnkey project whereas he got some input service Invoice for the Turnkey project and adjust it for the tax liability of output service consultancy service. Questions: 1) is it permissible to adjust the Input service credit of Turnkey project against the liability of output service Consultancy service irrespective of the fact that no bill for output service Turnkey Project service (Errection Commissionig service) was raised in 08-09. 2)If the answer above is Yes, than can it be possible to add the Errection service now w.e.f.Mar-09. Prepare the tax liability for Consultancy service & Errection Commissioning service(Nil) seperately and determine the total tax liability and therefrom deducting the total input service credit towards consultancy service and Turnkey project service. Thanks & regards.

[Markesh Antony]

Under the provisions of cenvat credit rules, 2004, one to one co-relation is not warranted. Only you need to ascertain that input and input services must be eligible inputs and input services. If the activity of installation is liable to tax for which you wish to avail cenvat credit and / or was not exempt, you can avail and utilize the credit even if the bill for the same is raised now.

AI Summary

Cenvat credit rules permit cross utilisation of eligible input services even without matching output invoices. Under the Cenvat Credit Rules, 2004 there is no one to one correlation requirement: eligible inputs and input services received for a turnkey project can be availed and utilised against the tax liability of consultancy output services provided the inputs/input services qualify and the installation/erection activity is taxable and not exempt. Credit may therefore be taken even if the bill for the erection & commissioning output service is raised later or registration for that service is effected subsequently.