Input credit of service tax

[Asked by Guest]

If the service provider is in providing service as well as tradgin opf goods, and the services he receives are used for boht purpose like telphone and all , so the input tax will be allowed 100% or 20%.

[Surender Gupta]

In your case, Cenvat Credit is allowed to the extent of 20% of output service tax liability.

[Madhukar N Hiregange]

Dear Preeti, When along with taxable servcies exempted services or non taxable servcies are provided then the restriction applies. In my view though not specifically stated, if trading is also done the restriction should apply. You would be allowed to avail of 100% credit on the following: a. Services used exclusively for providing taxable services. b. 100% on common inputs specified in 6(5) such as management consultacny, etc. c. 20% of OUTPUT TAX payable for the other common services. Now it is not clear whether all are mutually exclusive. We are of the opinion that the credits are available indivdiually. You may have to account for the same separately.

AI Summary

Cenvat credit eligibility clarified: full credit for exclusively used services, limited credit for common services.
When a provider supplies taxable services and trades, apportionment rules limit Cenvat Credit. Full credit is available for services used exclusively for taxable services and for specified common inputs such as management consultancy; other common services attract a limited credit proportionate to the output service tax liability. Credits should be accounted for and treated separately when taxable and non taxable activities coexist.