Credit of service tax on commission paid to foreign agent

[Guest]

We have paid export commission to foreign agents. As per rules we have deposited Service Tax as liability in case of foreign payment regarding service tax is on the person getting services. Now we are have paid commission for the same for the month of March06. Till date we have not taken credit of the same. Now Cenvat Credit Rules of Excise has changed and wide Notification No 81 dated 13/7/06 they have specied that if any unit is exporting under Duty Draw Back, he can not take Cenvat Credit of input services. Can we take the credit of Commission paid to foreign agents now.

[Surender Gupta]

Generally, you can take the credit within one year from the date on which you are entitled to avail the credit. Therefore, you may take the credit by the end of March 2007. On the other side, if you taking Duty Drawback, you have to ascertain that no duty drawback is not for the service tax portion before availing cenvat credit. You can not take two benefits simultaneously. But, one benefit is always allowed.

AI Summary

Cenvat credit on export commission may be availed within one year but prohibited if duty drawback covers the service tax. Entitlement to Cenvat credit on commission paid to foreign agents exists where service tax was paid by the service recipient, but the credit must be availed within one year of entitlement. Notification No.81/13-7-06 limits Cenvat credit for exporters who claim duty drawback; exporters must confirm that drawback does not compensate the service tax portion before taking Cenvat credit, because the same tax benefit cannot be claimed twice.