Input credit of service tax - Set off of service tax liability

[Guest]

a company whoes turnover is exceeding Rs. 1 crores but product manufacturing is non excisable hence no excise is charged to the customers. However during installation of machinery the company is charging eraction charges on which service tax is charged. Now my questions are 1. whether all expenses paid on which service tax paid where input credit of service tax available can be reduced from service tax liability? 2. In case any item used for manufactuing of machinery as above includes cenvat credit can be used to take set off of service tax liability? 3. As there is only one service provided by company to its customer as specified above, whether 100% input credit can be availed?

[Surender Gupta]

(1) Yes, you can avail the credit of service tax paid on input services utilized to provide output services. (2) A credit of excise duty paid on capital goods is available only if those capital goods are being utilized into providing output services. In this case since, capital goods are utilized to manufacture goods not providing output services, you can not avail the credit accordingly on capitla goods. (3) You can avail 100% credit of input services utilized into providing output services.

AI Summary

Input service tax credit: allowed when input services are used to provide output services; cenvat on capital goods restricted. Input service tax paid on services consumed in providing output services may be credited against service tax liability, and full credit is available where those input services directly support the output service. Excise/cenvat credit on capital goods is claimable only if the capital goods are used in providing output services; capital goods used solely to manufacture goods and not to furnish the output service are ineligible for cenvat set off.