availment of credit on 20% or 100%

[Asked by Guest]

Hi.. My query is relating to service tax. As per the notification , now we cant claim input credit , if we claiming abatement. But if we provind service in which abatement claimed and at the same time antoher one in whcih we dont claim any abatement So what will be the treatment here , wil we claim 100% credit or 20% or nil. Nil i think should not be applicable as if we provide exemp service den also we allowed to take benefit so question is between 20% and 100%

[Madhukar N Hiregange]

Under cenvat credit rules the availment of credit and the utilisation are two differnet aspects. Where abatements are cliamed (1/2006)the input credit for such servcies is to be avoided to be taken. This may or may not be possible. If possible then as and when the other taxable services are provided 100% would be admisisble. If separation not possible I do not think the credit can be availed at all.

Cenvat credit is available of service tax paid on input services. Input service is defined as services which are used for providing output service. Under the given facts, the assessee can claim 100% credit of service tax paid on (relevant)input services in case where abatement is not claimed. In case bifurcation of input service is not possible, Cenvat credit should be availed proportionately. Rate of 20% is applicable only in case of exempt services and not where abatement in value of service is claimed.

[Surender Gupta]

In the circumstances mentioned in the query, you can take the credit under rule 6(3) with rule 6(5). In other words 100% credit on certain services and upto 20% of service tax payble on remaining services subject to the conditinos of Rule6(3) and 6(5).

AI Summary

Cenvat credit entitlement: segregable input services allow full credit; unsegregable inputs require proportionate credit.
Availability of Cenvat credit on input services turns on whether inputs can be separately attributed to services for which abatement is not claimed; if separable, full credit may be availed for those inputs. If segregation is not possible, credit must be apportioned between abated and non abated services, and may be disallowed where apportionment cannot reasonably be made. The 20 percent concept pertains to exempt services and is not the standard for abated services; claim and utilisation must follow the applicable Cenvat procedural apportionment rules.