Input credit of service tax - commission agent

[SHANTI NARAIN]

one of our client is a commission agent. He has raised their Ist service invoice during February 2007 relating to the services rendered for the period January 07. Though the company has incurred certain expenditure during November 06 and December 06, however, no invoice has been raised. Please advise whether company can claim input service tax credit on expenditure incurred during November 06 and December 06, for which no income has been earned.

[Guest]

If there is nexus between the expenditure incurred in the month of November / December 2006 and services rendered in the month of January 2007, you can take the cenvat credit indeed.

AI Summary

Input service tax credit: entitlement hinges on nexus between expenditure and services rendered, permitting cenvat credit when connected. Whether a commission agent may claim input service tax credit for expenses incurred before the service period depends on a demonstrable nexus between those expenditures and the taxable services; if such causal link to the services rendered is established, the taxpayer may avail cenvat credit despite timing differences in expense incurrence and invoice or revenue recognition.