Taxindiaonline.com Taxindiaonline.com Taxindiainternational.com HRindiaonline.com
 
LOGIN
Forgot Password |  Register
Saturday , July 26, 2014 | Updated : Jul 26, 11:54 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
 
Income tax - Whether assessee is also eligible for deduction u/s 80IA on income earned from storage facility taken on rent and transportation income earned from sale of water from jetty to party's place - NO: ITAT (See 'Breaking News') RBI routinely puts through shredder pre-2005 bank notes: Minister (See 'Mixed Buzz') CAG of India takes over as Member of UN Board of Auditors; takes charge from Auditor General of China (See 'Breaking News') I-T - Whether disallowance under Rule 8D has to be in terms with decision of jurisdictional High Court (See '2014-TIOL-478-ITAT') Out of 11 Agro-Processing SEZs approved four are operational: Minister (See 'Mixed Buzz') CX - Penalty - common issue involved in these appeals is regarding imposition of penalties under Rule 25 for violating provisions of Rule 8; disputed by Party and Revenue on imposition / non-verification respectively, herein (See '2014-TIOL-1340') 14th Finance Commission to submit report by Oct-end (See 'Mixed Buzz') MCA clarifies on class of companies as per Sec 203(1) (See ‘Notification’ in ‘TIOL Library) Govt hikes interest rate on various Savings Schemes, including PPF (See ’TIOL Library’ for Notifications) Lok Sabha passes Finance Bill with many amendments (See 'Union Budget') Finance Bill amendments – Indirect Taxes - Pre-deposit - Amendment proposed to clarify that where duty and penalty are disputed , pre deposit is on the duty amount only Interest on refund of pre-deposit – Indirect Taxes – interest to be paid from the date of making pre-deposit at the rate to be notified Finance Bill - Notice of Amendment - capital gains on Mutual Funds - New tax regime not to apply for transactions done till July 10, 2014 Settlement Commission & Advance Ruling Authority to entertain even reassessment cases Wind energy - depreciation benefit extended + minor amendment in TP with respect to more than one price determined by most appropriate method Finance Bill likely to be passed today – certain cosmetic changes likely; Pre-deposit of duty or penalty or both to be clarified; Interest from Day one for pre-deposit (See 'DDT' Column) ST - Notification 34/04-ST - appellant is not eligible for exemption because entire goods transported by GTA in present case consisted of only single consignment and freight charges for single consignment exceeded Rs 750: CESTAT (See 'Breaking News') What are Challenges before GST? Can these be met? (See 'Guest' Column) India uses VETO to block WTO New Global Customs Rules on ‘trade facilitation’ Income tax - Whether when assessee fails to explain huge increase in sundry creditors and unsecured loans, additions made by AO in this regard are legally sustainable - YES: HC (See 'Breaking News') Anti Dumping Duty – In spite of HC Order, Govt continues with resurrection (See 'DDT') NDPS - Recall of Bail - One Bench can cancel bail granted by another - It is duty of court to recall own order granting bail by invoking Sec 482 Cr.P.C - Application allowed: HC (See 'Breaking News') Transitional period for resolutions passed under the Companies Act, 1956 – Govt clarifies (See 'TIOL Library') ST - Appellant M/s SRL engaged in business of acquiring land suitable for setting up wind farm projects as designated by M/s SEL and providing such land on exclusive basis to customer of M/s SEL- no Real Estate agent service can be said to have been provided by M/s SRL to M/s SEL: CESTAT (See 'Breaking News') What they said on the Budget (See 'DDT') Govt imposes definitive anti-dumping duty on many Rubber Chemicals (See 'Cus ADD' in What's New) Right time to cement trade pact with India, says US Official Govt seeks views of all political parties on appointment of judges Service Tax mop-up in Q1 goes up to Rs 38862 Cr from Rs 32617 Cr during same time last fiscal CBEC issues AGT order of 104 AC/DCs at All India level (See 'Transfer' in Pitara) Union Cabinet okays Bill to vest powers in SEBI to deal with Ponzi Schemes Govt decides to appoint Panel to review gas pricing mechanism CBDT issues transfer order of 33 Addl / JCITs (See Transfer in 'Pitara') Anti-dumping duty on Carbon Black, Phosphoric Acid, Vitamin C, Potassium Carbonate extended by one more year CBDT Chairman to inaugurate Special Return Receipt Counters at Civil Centre tomorrow Income Tax Return Filing - CBDT decides to keep offices open on Saturday + Sunday; additional counters to be set up up to July 31 NTT 'ghost' is back! FM needs to do 'same thing' only differently! (See ‘The Cob(Web) Column)
 
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 SEARCH
 
TIOL Mobile App
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
  • 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