Utilisation of Input tax credit

[Asked by Guest]

The input service tax credit can be utilised only to the extent of 20% of output service tax if both exempted and taxable services are provided with credit taken inputs. what happens to balance input tax credit (80%. whether it can be used for other services 100% or not. Please give me how it can be utilised in further periods.

The balance 80% credit will not lapse and can be carried forward to subsequent months for similar adjustment against liability of subsequent months. However, no refund of such balance portion will be allowed under any circumstances.

[Madhukar N Hiregange]

The important point to be noted is that if the specific input service is used only for the taxable services then 100% is available. Further there are 16 services when used in common for taxable and notaxable/ exempt services also 100% is available. The balance of the common input services in my view are to be adjusted to the extent of 20% of the output tax and balance carried forward. It maybe wise to have each of the credit account differently.

The balance amount of credit input(80%)can be carried forward to next quarter/half year and added to the credit availed during the next period and again 20 % of it can be utilised to meet out service tax liability.In any case there will not be any refund.

AI Summary

Input service tax credit limited in use; unutilised balance may be carried forward but is not refundable.
The document explains that input service tax credit for providers of both taxable and exempt services is subject to a 20% utilisation limit each period, with the unutilised balance carried forward for future adjustment and not refundable; full credit is available where an input service is used solely for taxable services and for a defined set of common services used across taxable and exempt activities, and practitioners are advised to maintain separate credit accounts and aggregate carryforward balances for subsequent utilisation.