Input tax credit on freight inward and other services

[Guest]

Our problem is as under we are registered under service tax act for transportation of goods by road we are paying service tax to the transporters on freight inward calculated on 25% of the freight amount we are paying service tax on that freight also on which the transporter is not charging on the basis on same calculation. we are paying service tax on freight outward also in those cases where the transporter is not charging service tax. we are paying service tax on other such services like commission, clearing and forwarding charges, courier and telephone services. please let us know whether we are entitled to claim input credit of service tax paid on freight inward and other services against the amount payable on freight outward, we shall be grateful for your early reply thanks and best regards s.c.garg/essel agro pvt ltd

[Ravi Chopra]

You can take credit of input services which is utilized for providing output services. One school of thought is that since under the definition of output services certain input services are also includible. But in my opinion it is very much difficult to find the services utilized for providing input services of goods transport. However, I am also of the opinion that you can avail the benefit of input services which is falling under the inclusive part of definition of input services rule 2(l) of CC Rules

AI Summary

Input tax credit entitlement hinges on whether inward freight and ancillary services are utilized in providing the taxable transport service. Entitlement to input tax credit for service tax paid on inward freight and ancillary services depends on whether those services are utilized in providing the taxpayer's taxable output service. Credit is available only for input services actually used to provide the output; some ancillary charges may qualify under the inclusive definition of input services, but practical tracing of utilization in goods-transport may be difficult, so claimability is conditional on classification as input services within the inclusive statutory definition.