Credit of Services Tax collected on consultancy

[CASUNIL BHANSALI]

Facts of the Case A Corporate body, having its main activities of dealing in share and securities, Investment and Consultancy in Capital Market & Finance. The Company is paying services Tax changed by the broker on dealing in share and securities. The company is charging and collecting services Tax on Consultancy in capital market & financial activities. Query : Whether the company can take the credit of Services Tax collected on consultancy.

[Surender Gupta]

If the definition of Input Services in broad terms, any input service related to business is available for cenvat credit. For this reason, service tax charged by the broker is available as cenvat credit. But if you go by the true aspects of the transactions, share broker service is not used to provide consultancy services directly or indirectly. Department may take a view that share broker service is not related to business as a whole but related to a particular activity of earning profit. And therefore, department may not allow you the credit.

Rule 3(1) of CENVAT Credit Rules, 2004 ('Rules' for short) allows a manufacturer or producer of final products or a provider of output service to take credit of duty/service tax etc., paid on any input or capital goods received in the factory of manufacture of final products or premises of the provider of output service and an input service received by the manufacturer of final products or by the provider of output service. Rule 3(4) provides that the CENVAT Credit may be utilized for the payment of- *Any duty or excise on any final product; or *An amount equal to CENVAT credit taken on input if such inputs are removed as such or after being partially processed; or *An amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or *An amount equal under Rule 16(2) of Central Excise Rules, 2002; or *Service tax on any output service According to me, by virtue of the provisions contained in 3(4)(5) ie "service tax on any output service" you have good chance to argue and claim the credit of service tax paid on input service against the output service.

[SUNILKUMAR GUPTA]

For claiming the Cenvat Credit you please refer to new Rule 6(3A) of Cenvat Credit Rules , 2004.

AI Summary

Cenvat credit for input services may be claimed against service tax on output services when a clear business nexus exists.
Whether taxes on broker and consultancy services qualify as creditable input services hinges on the business nexus to the provider's output service; Cenvat credit may be utilized against service tax on output services, but departmental scrutiny may deny credit if broker services are found unrelated to the output service.