Tuesday, September 11, 2012

Input Service Meaning CENVAT Credit availment Time on Input services


on Tuesday, September 11, 2012

Definition of input services, inclusions and exclusions has been give below.

Input services Meaning 

(i) Any service used by the provider of taxable service for providing output service; or 

(ii) Used by a manufacturer whether directly or indirectly in relation to manufacture of final product and clearance of final product upto the place of removal. 

Inclusions 

Services in relation to 
  1. Modernization or renovation or repairs of the premises of provider of output service or an office relating to such premises.
  2. Advertisement or sales promotion 
  3. Market research 
  4. Storage up to the place of removal 
  5. Procurement of inputs 
  6. Accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, business exhibition, legal service) 
  7. Inward transportation of inputs or capital goods and 
  8. Outward transportation up to the place of removal 
Exclusions 

  1. Service portion in the execution of a works contract and construction services including services listed in Section 66E(b) in so far as they are used for construction or execution of works contract of a building or a civil structure or part thereof or laying of  foundation or making of structures for the support of capital goods except for the provision of one or more of the specified services; or  
  2. Services provided by renting of a motor vehicle in so far as they relate to a motor vehicle which is not capital goods ; or 
  3. Service of general insurance business, servicing, repair and maintenance , in so far as they relate to a motor vehicle which is not capital goods except when used by a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by him; or an insurance company in respect of a motor vehicle insured or reinsured by such person. 
  4. Services provided in relation to outdoor  catering, beauty treatment, health service, cosmetic and plastic surgery, membership of  a club, health and fitness centre, life  insurance, health insurance and travel  benefit extended to employees on vacation  such as leave or home travel concession,  when such services are used primarily for personal use or consumption of any employee. 

Further there is a change in time of availment of CENVAT credit on input services: Earlier to 1.4.2011, the credits could be availed making payment of invoice. 

  • Wef 1.4.2011 the CENVAT Credit on input services can be availed on receipt of invoice. However the payment has to be made within three months.  
  • The CENVAT credit of service tax has to be reversed in event of non payment with in 3 months as referred here in above. However the same can be taken back as credit on making payment.
  • If subsequent to payment made or invoice received, the amount is received back or  credit note is received, when the value of service is renegotiated or altered for any reason the credit availed to that extent requires to be reversed/paid.
  • Credit on the invoices issued prior to 01.04.2011 by the service provider would continue to be eligible only on payment basis and not on receipt of invoice. 
Also Read Major Changes in Cenvat Credit rules wef 01.04.2012 by CA Vikas Kandelwal.
Duties and Taxes Available for Cenvat Credit 

Definition of ‘input service’ has been changed w.e.f. 1-4-2011. The new definition is significantly different from the earlier definition of ‘input service’.
Rule 2(l) of Cenvat Credit Rules (as effective from 1-4-2011), defines ‘input service’ as follows –
“Input service” means any service, -
(i) used by a provider of taxable service for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,
and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

but excludes services, -
(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for- (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or
(B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or
(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession,when such services are used primarily for personal use or consumption of any employee.

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  1. What about the service tax on telephone and mobile services and internet and broadband services ? Will these be considered as input services ?

    ReplyDelete
  2. Please clarify the place of removal.

    ReplyDelete
  3. In Central Excise valuation rules,
    Job work 10A

    When a job worker liable to duty the assessable value will be as per rule 10a
    (i)in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer;
    (ii) in a case where the goods are not sold by the principal manufacturer at the time of removal of goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of job-worker and where the principal manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of said goods from the factory of job-worker;
    Kindly any one give clear examples for the above cases

    ReplyDelete
  4. I have a query on service tax.

    FACT:
    1) Our Company applied for Service tax registration on 19.07.2012 and got ST-2 on 30.07.2012.
    2) The Company has applied for NBFC registration certificate from RBI and the same is in process.
    3) Commercial activity can be commenced upon receipt of NBFC certificate only.
    4) Till 31st Aug 2012, the Company has not availed any CENVAT.

    QUERY:
    1) As the Company’s operation has not yet been started (in the absence of NBFC license), whether the Company is eligible to avail CENVAT or not?

    ReplyDelete
  5. we are manufacturer of machine. shall we take the input credit on reversed charge on renta cap and general insurance.

    please advice.

    ReplyDelete