and Industry, Coimbatore
Circular
May 10, 2010
Service Tax - Clarification on Credit on Input Services
We wish to inform our members that the Service Tax Department clarified the two issues regarding CENVAT credit by vide circular no.122/03/2010. Here with we are attaching the relevant circular for your reference.
Note on Circular:
According to section 68, EVERY person providing taxable service shall pay service tax at the rate prescribed in section 66 in such manner and within such period as may be prescribed.
Rule 6 of the Service tax Rules 1994 prescribes the time period for the payment of service tax and explanation to the third proviso to the sub-rule 1 prescribes that where the transaction of taxable service is with the associated enterprises, any payment received towards the value of taxable service, in such case shall include any amount credited or debited in the books of accounts, as the case may be, to any account, whether called suspense account or by any other name, in the books of account of a person liable to pay service tax.
In case of Associated parties credited to books of accounts shall be treated as payment. It has been clarified by the department vide circular No 122/03/2010 that the CENVAT credit of such credit can be taken on the basis of credit made in the books of accounts and payment of service tax to the government account.
It means we have to seek a confirmation from the associated enterprise for the payment of service tax to the government account for taking the CENVAT credit. It is further clarified that in case of transaction between associated enterprise Service tax credit can be taken only after the payment of service tax to the government account by the associated enterprise.
Assuring you of our services.
D Nandakumar
Hon. Secretary