One to one correlation - input and output service

[RAJESH MANGAL AGRAWAL]

One service provider X is registered in two output service “A” and “B” . Suppose tax liability on output Service A is Rs.10000/- but no Cenvat credit available against output service ‘A”. Similarly Suppose tax liability on output Service B is Rs.Nil but Cenvat credit available against output service ‘B” is Rs.4000/- Whether X can adjust the Cenvat credit of Rs. 4000/- availed on output service ‘B” against the tax liability of Rs. 10000/- arose on output service “A” and pay balance amount of Rs. 6000/- or Whether X has to pay Rs. 10000/- tax liability as occurred against output service “A” and carry forward the Cenvat credit of Rs. 4000/- occurred against service “B” and adjust it only from tax liability of output service “B” only. i.e. for adjustment of Cenvat credit one to one relation service wise is necessary and Cenvat credit can be claimed against that output service against which the same has been occurred. Thanks & Regards

[Markesh Antony]

There is no need to have one to one correlation. But, why there is NIL service tax on output service B. If the zero liability due to time factor like no receipt during the relevant period, you can avail the credit correctly on both the service. But if the service B is exempt or not taxable otherwise, the credit related to B is not allowed. You need to ascertain the facts and circumstances.

[RadheyShyam Mangal]

Yes, the service provider "x" can pay service tax on output service "a" from cenvat credit availed on input service related to output service "b" provided service "b" is not exempted. there is no requirement of one to one corelation of cenvat credit utilization for payment of service tax/excise duty from cenvat credit availed on input services/inputs.

[Prasanna Kumar]

You have said X has obtained two out put service A adn B. It is not clear either in one registration certificate or in one premises and in the name of one company or firm. However, please note there is no one to one correlation required to set off Cenvat Credit of input services against two different services of a same firm or establishment. The Input Service Distributor is coined on the same principle.

AI Summary

Cenvat credit can be used across taxable outputs unless the input relates to an exempt service only. There is no requirement of a one-to-one correlation between credit availed on one output service and tax liability on another; cenvat credit on input services may be used to pay tax on different taxable outputs within the same entity unless the credit arises from inputs or services attributable to an exempt or non-taxable output.