| |
SERVICE TAX CREDIT RULES, 2002
There are three conditions to meet to avail
service tax credit. These are :
- Eligibility [Rule 3(1) & Rule 5(3)]
- Allowability [Rule 3(3,4& 5)]
- Utilization [Rule 4(1)]
Eligibility :
The primary
conditions for eligibility are as follows (have to
be met simultaneously) |
|
|
(a) |
Input service should
be utilized in relation to output
service (though the requirement of both input and
output service under the same category is done away
with from 14th May 2003); |
|
|
(b) |
The bill/invoice/challan of
input service should be issued on or after 14th May
2003; |
|
|
(c) |
The claimant of credit should
maintain the specified records, i.e. |
|
|
|
- Serial number and date of document on which
the credit is claimed,
- Service tax registration number and name of
input service provider,
- Description and value of input service,
- Service tax credit availed,
- Service tax credit utilized.
|
(d) |
Credit can be claimed only
upon payment of input service bill and service
tax amount. |
Allowability :
If the output service provider maintains
separate account (if he is rendering output service, which
is chargeable to tax and also the exempted or non-taxable
service, i.e. “composite services”), then he
can claim the credit of entire service tax paid on input
service.
If the output service provider (who is
rendering such composite services) is not able to maintain
separate records, then he will be allowed credit only to
the extent of 35% of service tax payable on such output
service.
Utilization :
The service tax credit availed
can be utilized for payment of service
tax on output service, however, to the extent of accumulated
credit as on the last day of the month or the quarter.
Conclusion :
It can be seen that the eligibility, allowability
and utilization are three different aspects and may not
be in the same time period because the service tax is payable
on output service only upon receipt of the bill
whereas the claim of input credit is only upon payment
of the input service bill. Therefore, having satisfied
that input service is utilized in relation to output service,
which is taxable, there is no further requirement that both
should fall in the same month or quarter as the case may
be.
This also
can be elaborated as follows : |
| |
|
| 1. |
The period of input service
in relation to the output service could be different, |
| |
|
| 2. |
Even if the period is same,
the date of receipt of bill of output service and
the date of payment of input service could be different, |
| |
|
| 3. |
The one-to-one correlation of
input and output service is not required. |
Secondly, claim of service tax and allowability
is on the basis of filing the specified form annexed to
the return in Form ST-3 and the utilization is against the
payment on output service at any point of time, which is
made along with the return or thereafter. Further, the words
“in relation to” is missing in Rule 4(1) for
the purpose of utilization of service tax credit. Therefore
where the eligibility depends on meeting certain criteria/conditions,
the claim depends on 35% of output service tax payable (in
respect of composite service provider if no separate records
are maintained) and the allowability is based on the form
annexed to the return and the utilization can be at any
time thereafter.
Upon taking into account the overall situation,
it appears that it is not required that the credit should
be based in relation to the output service tax amount of
the same month but it should be allowed taking into account
the entire period comprised in the return of service tax.
Further the liability of service tax is determined on return
basis, which may be assessed also.
However, it is possible that the department
may take a very restrictive meaning and try to limit the
credit on month-to-month basis instead of return-to-return
basis, on the ground that payment of service tax is to be
made on monthly/quarterly basis.
In absence of any judicial pronouncements
so far, it is advised that the claim may be raised on return-to-return
basis but the availment or utilization may not be taken
till the matter may be decided judicially or clarified by
the department.
|
|
