Query on Service Tax

[sourabh jain]

Q1....For Taking Credit of service tax what document should be prepared by service provider .

Q2.  What do you mean by Input Service Distributor ? and what are the examples what are the implication of it in service tax ? 

[YAGAY andSUN]

1) CENVAT credit may be availed on following documents:-

Invoice

Bill

Challan (Rule 9(1)(e) amended to allow availment of credit on tax payment challan in the case of payment of Service tax by the service receiver under the reverse charge mechanism)

Debit Note (if the debit note consist of all the ingredients of an Invoice/Bill/Challan)

TR-6/GAR Challan

Service recepient can avail the CENVAT credit on the aforesaid documents.

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2) Input Service Distibutor:-  Under Rule 7 and 7A of the CENVAT credit Rules 2004, the office of the Manufacturer (under Rule 7) and the office of the Service Provider (under Rule 7A) can passon the credit of Service Tax which were levied on the services received/incurred by the office of the manufacturer/Service Provider on the account of manufacturing Units or Service providers.

The Input Service Distributor will get itself registered with the jurisdictional Service Tax Department and on Monthly basis, on an Invoice, will pass on the credit of service tax to the manufacturing units/service providers which are manufacturing dutiable goods or providing output taxable services.

Rule 7 for input service distributors amended to provide that

–credit of Service tax attributable to service used wholly in a unit shall be distributed only to that unit and

 –credit of Service tax attributable to service used in more than one unit shall be distributed pro-rata on the basis of the turnover of the concerned unit to the sum total of the turnover of all the units to which the service relates.

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Example:-

Suppose a manufacturer has three units say A, B and C and it has corporate office at New Delhi.  At New Delhi, office rent, Recruitment expenses, Bank Charges, Audit Fees etc are being on which service tax is applicable.  The manufacturer accumulate this tax part and distribute it to all his three manufacturing units according to their turnover.  This way the impact of taxation pertaining to Service Tax will be revenue neutral and all the three units will utilized this credit against its liability towards finished products or output service.

 

AI Summary

Input Service Distributor: registered office distributes service tax credit to units, with pro rata allocation by turnover. CENVAT credit for service tax is available to the service recipient on specified documents including invoice, bill, challan (including reverse charge payment challan), debit note with invoice elements, or TR 6/GAR challan. An Input Service Distributor registers to receive service tax on shared services and issues monthly invoices to distribute credit to manufacturing or service units. Credit wholly used by one unit is allocated to that unit; credit for services used by multiple units is distributed pro rata based on each unit's turnover relative to the total turnover of the units.