CREDIT OF SERVICE TAX

[vishal sharma]

Hello All, My client who is manufacturer of Raw Jute, Hessian Cloth etc. has two units, located in two different states, namely A and B. Raw Jute, Hessian Cloth etc. which are subject to NIL rate of excise duty. Unit A is paying lease rent for its factory premises on which it is paying service tax. And Unit B have some surplus land/premises, this surplus land is being let out and rental income is earned there from on which service tax is collected. My query is : (1) Whether service tax paid for Unit A can be distributed by it as INPUT SERVICE DISTRIBUTOR to its unit B in the instant case of manufacturing of excise exempt product? (2)Whether service tax paid for Unit A can be distributed by it as INPUT SERVICE DISTRIBUTOR to its unit B in case Unit A starts manufacturing excisable product or starts providing taxable service in addition to manufacturing of Raw Jute, Hessian cloth etc.which is an excise exempt product? (2) And whether service tax so distributed can be utilised as CENVAT CREDIT by Unit B against Service Tax collected on rental income? Awaiting for reply at the earliest Thanks Vishal Sharma

AI Summary

Manufacturer Seeks Guidance on Distributing Service Tax Credits; Unit A Cannot Register as ISD Without Output Services A manufacturer with units in two states, A and B, seeks guidance on distributing service tax credits. Unit A pays service tax on lease rent, while Unit B earns rental income subject to service tax. Queries include whether Unit A can distribute service tax credits to Unit B as an Input Service Distributor (ISD) when manufacturing excise-exempt products or if Unit A starts manufacturing excisable products. Responses indicate that Unit A cannot register as an ISD without providing output services, thus cannot distribute credits. Unit B can only utilize Cenvat Credit for input services related to its taxable rental income.