Taxindiaonline.com Taxindiaonline.com Taxindiainternational.com HRindiaonline.com
 
LOGIN
Forgot Password |  Register
Thursday , December 18, 2014 | Updated : Dec 18, 11:18 IST
Income Tax    Customs    Excise    Service Tax    FEMA    DGFT    SEZ    Misc    Pitara    Budget   
About Us Contact Us Advertise
Taxindiaonline.com Taxindiaonline.com Taxindiainternational.com
NEWS FLASH
 
Has Union Cabinet really put GST Caravan on 'fire'! (See 'The Cob (Web)'Column) ST - Appellant manufactures liquid gases - as customers do not have cryogenic tanks for storage, appellant leases & earns rent on tanks - no ST payable under Storage services as appellant has no control on goods in tank: CESTAT (See 'Breaking News') New Companies Act - Bail for Terrorist - jail for businessman? + Amendments to Companies Act - Ease of Doing Business in India (See 'DDT' Column) Prevention of Corruption Act - substitution of Sec 13 - Govt seeks Law Commission's views (See 'Mixed Buzz') Income tax - Whether even if there is no transfer of property rights to power agent, capital gains can be taxed in his hand - NO: HC (See 'Breaking News') CAG recommends Govt needs to recover USD 161 mn disallowed cost of three oil wells (See 'Mixed Buzz') CX - Banding of soap cakes with tapes pre-printed with brand & MRP of combo pack amounts to manufacture - appellant, however, paying ST on it - since appellant is in specified area of HP they are entitled for benefit of exemption - non- filing of declaration is curable defect: CESTAT (See 'Breaking News') Cadre Review - New Commissionerates - CESTAT Appeal Forms Amended (See 'DDT') Gender Justice-Gender Tax (See 'The Third Eye'in 'Hrindiaonline.Com') I-T - Whether assessee can claim deduction u/s 35AB on accrual basis for a higher amount, even if it has actually paid less: ITAT (See '2014-TIOL-984') Permission for Prosecution of govt servants - Single Window System is in place: Minister (See 'Mixed Buzz') Union Cabinet gives nod to table GST Bill in current session of Parliament Setback for Nokia India; VAT - Whether mobile battery charger is integral part of cell phone and not an accessory and thus it is eligible of concessional rate of tax - NO: Supreme Court (See ‘Breaking News’) Lok Sabha okays amendments in New Companies Act CBEC amends CESTAT Appeal Forms + also amends exchange rate for Japanese Yen (See 'What's New') 'Make in India' Scheme: No special concessions for foreign investors, says Minister (See 'Mixed Buzz') India imported 2750 tonnes of gold in last 3 years (See 'Mixed Buzz') SC directs Centre to take its consent before appointing CVC Sec 35AD - CBDT notifies guidelines for notification of a semiconductor wafer fabrication manufacturing unit (See 'What's New') ST - Commercialisation of practice of law - aspect that Advocate is an officer of Court and part of administration of justice has not been brushed aside by Parliament - Rather by rational differentiation it has proceeded to impose ST on legal services - Petitions dismissed: HC (See 'Breaking News') ACC okays appointment of Presiding Officers in 8 Debts Recovery Tribunals (See ‘Mixed Buzz’) Global intellectual property filings record boost in 2013: WIPO (See ‘Mixed Buzz’) Audit by CE/Service Tax officers – Audit should provide help and suggestions to taxpayers to improve compliance (See 'DDT' Column) Mrs Smriti Irani, Please Think Before Launching 'Think in India'(See 'Ice Cubes') Income tax - Whether in case of Joint Development Agreement, transfer of land in lieu of developed area would crystallise only on the day developer hands over developed area - YES: ITAT (See 'Breaking News') Safety Standard in Cars: India to make guidelines mandatory from 2020 (See 'Mixed Buzz')
 
Bookmark and Share
How does Input Service Distributor distribute service tax credit?

MAY 18, 2011

By Anuj Bansal, CA  

INPUT Service Distributor means an office of the manufacturer or producer of final products or provider of output service, which receives invoices towards purchases of input services from the provider of input services and further, distribute the Input Tax Credit by issuing invoices, bill or challan to such manufacturer or producer or provider.

Registration of ISD:

ISD shall make an application for registration within a period of thirty days from the commencement of business.

ISD shall issue an Invoice:

Input service distributor shall in respect of credit distributed issue an invoice / bill / challan to each of the recipient of the credit.

Invoice / bill / challan shall have following contents:

++ Serial number.

++ Name, address and registration number of the person providing input services.

++ Serial number and date of invoice of the person providing input services.

++ Name, address and the registration number of the ISD.

++ Name and address of the recipient of the credit distributed.

++ The amount of credit distributed.

++ Signed by the authorized person.

Return:

ISD shall furnish a half yearly return.

Distribution credit by ISD:

As stated above ISD distributes credits to its units providing taxable services or manufacturing excisable goods. The distribution of such credit is subject to the following conditions:

(a) the credit distributed against an eligible document shall not exceed the amount of service tax paid thereon, and

(b) credit of service tax attributable to services used in a unit either exclusively manufacturing exempted goods or exclusively providing exempted services shall not be distributed.

There is no specific method / provision for distribution of credit is prescribed under the law. In the case of Ecof Industries P. Ltd. v. CCE (2010) 17 STR 515 (Tri-Bang.) it has been held that there is no restriction on the distribution of service tax credit. Further, the court observed that in case department wants to place restriction on distribution of service tax credit, the rule is required to be amended. Accordingly, even in case the whole of Input Tax Credit is distributed / transferred to one unit, same shall not be disputed by the department. However, generally the Credit is distributed in accordance to the ratio of turnover of goods / services by each of the unit manufacturing the goods or providing the services. The said method is explained with the help of an example as follows:


Particulars

 

Turnover

Tax

 

 

(Rs.)

(Rs.)

Taxable & Exempted Goods / Services

 

 

 

Factory Unit - Excisable Goods

(a)

20000000

2400000

 

 

 

 

Unit providing Taxable Services

(b)

10000000

1000000

 

 

 

 

Unit providing Exempted Services (including trading)

(c)

10000000

1000000

Input Services :

 

 

 

 

 

 

 

Excise

   

Input Services Directly related to Factory Unit

(d)

200000

20000

ISD in relation to Factory Unit

(e) = (o)

 

50000

Total Input Service Tax Available for set-off

(f) = (d) + (e)

 

70000

 

  

Services

  

Input Services Directly related to Unit providing Taxable Services

(g)

500000

50000

ISD in relation to Unit providing Taxable Services

(h) = (p)

 

25000

Total Input Service Tax Available for set-off

(i) = (j) + (k)

 

75000

 

  

Common Services Input

  

- Advertisement

(l)

500000

50000

- Rent of office

(m)

500000

50000

Total

(n) = (l) + (m)

1000000

100000

 

  

Distribution of Input Tax Credit

  
 

  

ISD in relation to Factory Unit

(o) = (n) X (a) / [(a) + (b) +(c)]

 

50000

 

  

ISD in relation to Unit providing taxable Services

(p) = (n) X (b) / [(a) + (b) +(c)]

 

25000

 

  

ISD in relation to Unit providing Exempted Services

(q) = (n) X (c) / [(a) + (b) +(c)]

 

25000

In the light of above discussion, it is stated that in order to distribute input tax credit for the common services, the input tax credit shall be first debited to a separate account (hereinafter referred as ‘ISD A/c'). Thereafter, the total input tax credit in the ISD A/c. shall be distributed in ratio of turnover of goods manufactured, taxable services provided and exempted services provided. The input tax credit pertaining to Excisable Goods shall be transferred to account of Input tax credit A/c. in regard to Factory Unit (hereinafter referred as ITC (Factory) A/c.) and The input tax credit pertaining to Taxable Services shall be transferred to account of Input tax credit A/c. in regard to Unit providing taxable Services(hereinafter referred as ITC (Service Tax) A/c.). The transfer of input tax credit to both the accounts from the ISD A/c. shall be on the strength of Invoice / challan. The company is also required to pass proper entries in the books of accounts for such transfers. Further, it is also informed that Input Tax Credit pertaining to Exempted Services shall be booked as expense and set-off for the same shall not be available.

In the above example total input tax credit in the ISD A/c. is Rs. 1,00,000/- which is distributed between Factory Unit, Unit Providing taxable services and Unit Providing exempted services. The amount of input tax credit pertaining to Factory Unit is Rs. 50,000/- and the amount of input tax credit pertaining to Taxable Services Unit is Rs. 25,000/-. Said amounts shall be transferred to ITC (Factory) A/c. and ITC (Service Tax) A/c. respectively on the strength of Invoice / challan. Further, amount of input tax credit pertaining to exempted services i.e. Rs. 25,000/- shall be booked as expense in the books of accounts.


POST YOUR COMMENTS
   
 
 
TIOL Mobile App
TIOL SEARCH
 
TIOL Subscriptions
 All-In-One Package
 Indirect Tax Package
 Income Tax Package
<< More Packages>>
 
   
             
Income Tax Customs Excise Service Tax FEMA DGFT SEZ Misc Pitara Budget
  • Notifications
  • Circulars
  • SC Cases
  • HC Cases
  • ITAT Cases
  • Instructions
  • Advance Ruling
  • Settlement
  • Other Case
  • Directorate of Income Tax (Systems)
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Settlement
  • Advance Ruling
  • Safeguard Duty Notfn
  • Anti-dumping Notfn
  • Drawback Cases
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Settlement
  • Advance Ruling
  • Excise Amendment
  • Clean Energy Cess Notfn
  • MISC Circulars
  • 37B Order
  • Commr.(A) Order
  • CESTAT
  • Notifications
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Miscellaneous
  • Advance Ruling
  • FAQ
  • Finance Act, 1994
  • Commr. (A) Orders
  • 37B Order
  • Removal of Difficulty
  • VCES
  • Accounting Head
  • Exchange Manual
  • Fema Notifications
  • SC Cases
  • HC Cases
  • RBI Notifications
  • Act
  • Rules
  • Regulations
  • Master Circulars
  • RBI Circulars
  • Depository Scheme
  • Press Note
  • Notifications
  • Circulars
  • Public Notices
  • Trade Notice
  • FTDR Amendment 2010
  • MISC
  • State Acts
  • Notifications
  • Instructions
  • Act 2005
  • Rules 2006
  • DGEP
  • State Policy
  • SC Cases
  • HC Cases
  • VAT Cases
  • Deputation Posts
  • Service News
  • The Insider
  • Transfer
  • Promotion
  • Recruitment Rules
  • Transfer Policy
  • Training Circulars
  • Service Cases
  • MISC
  • Pay Commission
  • Cadre Review
  • Budget Circular 2013-14
  • Union Budgets
  • Economic Surveys
  • Budget Speeches
  • Finance Acts
  • Finance Bill
  • TRU - D. O. Letter
  • A Taxindiaonline Website. Copyright © 2014 Taxindiaonline.com Pvt.Ltd. All rights reserved. | Powered by 4th Dimension