Service Tax Credit Rules, 2002

1. Short title and commencement.-

1. (1) These rules may be called the Service Tax Credit (Amendment) Rules, 2004.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions.-

(1) In these rules, unless the context otherwise requires,-

(a) “Act” means the Finance Act, 1994 (32 of 1994)

(a) “output service” means any taxable service rendered by the service provider to a customer, client, subscriber, policy holder or any other person, as the case may be;

(b) “input service” means any service received and consumed by a service provider in relation to rendering of output service;

3. Service tax credit.-

(1) An output service provider shall be allowed to take credit (hereinafter referred to as service tax credit) of the service tax paid on input service in the following manner, namely:-

(a) where the input service falls in the same category of taxable service as that of output service, service tax credit shall be allowed to be taken on such input service for which invoice or bill or challan is issued on or after the sixteenth day of August, 2002; (b) in any other case, service tax credit shall be allowed to be taken on such input service for which invoice or bill or challan is issued on or after the fourteenth day of May, 2003:

Provided that the output service provider shall be allowed to take such credit, on or after the day on which he makes payment of the value of input service and the service tax paid or payable as indicated in invoice or bill or challan referred to in sub-rule (1) of rule 5.

(2) For the purposes of these rules, two services shall be deemed to be falling in the same category of taxable service, if the input service and output service fall in the same sub- clause of clause (105) of section 65 of the Act.

Provided that the taxable services defined in sub-clauses (zm) and (zp) of clause 105 of section 65 of the Act shall be deemed to be falling within the same category.

Illustration:

(i) A photography studio in course of providing photography services avails service of processing labs for developing and processing of exposed film and printing of photographs. In this case service provided, by the colour lab to photography studio and by the photography studio to a customer, both fall in the same category of service i.e. photography service. Therefore, photography studio is entitled to take credit of service tax paid by the processing lab.

(ii) A stevedore hires dock labour from the port trust and provides such labour to his client. In this case the service provided, by the port trust to stevedore and by stevedore to client, both fall in the category of port service. Therefore, stevedore is entitled to take credit of service tax paid by the port trust.

(iii) An advertising agency may avail services of a photography studio and/or a sound recording studio and/or a video tape production agency during the course of rendering service to it’s client. Service provided by the photography studio or the sound recording studio or the video tape production agency, as the case may be, does not fall in the category of advertising agency service. Therefore, advertising agency is not entitled to take credit of service tax paid by a photography studio or a sound recording studio or a video tape production agency.

(3) No service tax credit shall be allowed on input service received and consumed in relation to rendering of such output service which is either exempt from whole of the service tax leviable thereon or is not a taxable service, except in the circumstances mentioned in sub-rules (4) and (5).

(4) Where a service provider avails credit on any input service and renders such output services which are chargeable to service tax as well as exempted services or non taxable services, as the case may be, then the service provider shall maintain separate accounts for receipt and consumption of input service meant for consumption in relation to rendering of output services which are chargeable to service tax and the inputs service meant for consumption in relation to rendering of output services which are exempted services or non-taxable services, as the case may be. The service provider shall take credit only on that portion of input service, which is intended for use in relation to rendering output services, which are chargeable to service tax.

(5) In case the service provider, opts not to maintain separate accounts of input service meant for consumption in relation to rendering of such output services which are chargeable to service tax as well as exempted services or non-taxable services, he shall be allowed to utilize service tax credit for payment of service tax on any output service only to the extent of an amount not exceeding thirty-five per cent. of the amount of service tax payable on such output service.

(6) Service tax credit on the service provided in relation to telephone connection shall be allowed only in respect of such telephone connections which are installed in the premises from where output service is provided.

4. Utilisation of service tax credit.-

(1) The service tax credit availed on input service may be utilised for payment of service tax on the output service.

Provided that while paying service tax on the output service, the service tax credit shall be utilized only to the extent such credit is available on the last day of a month, for payment of service tax relating to the month or in case where the assessee is an individual or proprietary firm or partnership firm, to the extent such credit is available on the last day of the quarter for payment of service tax relating to the quarter.

(2) Refund of service tax credit availed on input service shall not be allowed under any circumstance.

4A. Transfer of service tax credit.- If an output service provider shifts his establishment to another site or his establishment is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of establishment to a joint venture with the specific provision for transfer of liabilities of such establishment, then, the output service provider shall be allowed to transfer the service tax credit lying unutilized in his account to such transferred, sold, merged or amalgamated establishment.

5. Documents and accounts.- (1) The service tax credit shall be availed on the basis of an invoice or bill or challan issued by the service provider of input service on or after 16th day of August 2002, indicating clearly the serial number of document, date of issue, description and value of the input service, the service tax paid /payable, service tax registration No. and address of input service provider.

(2) The output service provider availing service tax credit shall take reasonable steps to ensure that the input services in respect of which he has availed the service tax credit are the services on which the service tax, as indicated in the documents on the basis of which credit is availed, has been paid.

Explanation: The output service provider availing service tax credit shall be deemed to have taken reasonable steps, if he satisfies himself about the identity and address of the input service provider, issuing the documents on the basis of which the service tax credit is availed and that the details regarding description and value of input service received by him has been furnished correctly in the documents.

(3) The output service provider availing service tax credit shall maintain proper records in which the relevant information regarding the Sl. No. and date of document on which service tax credit is availed, service tax registration No. and name of the input service provider, description and value of input service, service tax credit availed, service tax credit utilized for payment of service tax on output service shall be recorded. The burden of proof regarding the admissibility of service tax credit shall lie upon the person taking such credit.

(4) The output service provider availing service tax credit shall submit to the Superintendent of Central Excise, a return in the form annexed to these rules along with the Form ST-3 as specified in rule 7 of the Service Tax Rules , 1994.

6. Recovery of service tax credit.- Where the service tax credit has been wrongly availed or utilized , whatsoever, such credit along with interest shall be recoverable from the person availing such service tax credit and the provisions of section 73, 75, 76 and 78 of the Act shall apply mutatis mutandis for effecting such recoveries.

 
FORM
(see sub-rule (4) of rule 5)
Return under rule 5 of the Service Tax Credit Rules, 2002
(For the period from________ to________)


Input service

 
Sl No. Date and no. of document on which credit is availed Details of input service provider Details of input service
ST regd. No. Address Description Value Credit taken
             


Service tax credit

 
Opening balance Credit taken Credit utilised Closing balance
       


Output service

(a) Description of output services in relation to rendering of which the input services are consumed:

(b) Whether separate account is maintained for receipt and consumption of input service meant for consumption in relation to rendering of output services which are taxable or exempted or non-taxable service:         Yes/No

 
Place:-
Date :-		 Name and signature of the assessee or
his authorised representative”.


[this page last updated on 20.5.2007]

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