TaxTMI 
TaxTMI 
Whether service tax credit taken on GTA, Chargo handling & Business auxiliary service for procuring the Iron ore (raw material for sponge iron manufactrer) is required to reverse on sale of of some Iron Ore.
Reversal of Service tax credit on sale of raw material
17 Jul 2012 
6 Replies 
8645 Views Asked by
Reversal of service tax credit on services linked to removal of inputs may not be required under Cenvat rules
Dispute centers on whether Cenvat credit on services like GTA, charge handling and business auxiliary services must be reversed when raw material is sold. One position applies input removal rules to require reversal; the prevailing tribunal and high court view distinguishes input goods from input services and holds that statutory reversal for removal of inputs/capital goods does not mandate reversal of service credit where inputs are removed as such. By products generated in manufacture do not trigger reversal. Factual issues such as trading versus removal as such and audit challenges remain relevant. (AI Summary)
Dispute centers on whether Cenvat credit on services like GTA, charge handling and business auxiliary services must be reversed when raw material is sold. One position applies input removal rules to require reversal; the prevailing tribunal and high court view distinguishes input goods from input services and holds that statutory reversal for removal of inputs/capital goods does not mandate reversal of service credit where inputs are removed as such. By products generated in manufacture do not trigger reversal. Factual issues such as trading versus removal as such and audit challenges remain relevant. (AI Summary)