Service Tax Input Credit

Service tax input credit can be availed by manufacturers and adjusted against the tax payable on output services. There is an exhaustive list of services that are included and excluded from this.

Note: Service Tax has been replaced by the Goods and Services Tax (GST) starting 1 July 2017.

Manufacturers can avail CENVAT credit on input services and that can be adjusted against the tax payable on the output services.

Input services are any service that is used by a provider for providing output service that is taxable or is used by a manufacturer either directly or indirectly in relation to manufacture the final product and clearance of the final product.

Manufacturer can avail CENVAT credit on inputs that he uses for his output service that is taxable. For instance an interior decorating company pays rent for its office but the service that it provides is output service. The service tax paid on rent is input credit and can be adjusted against the service tax payable by the company.

Manufacturer using Annual Maintenance Contract and transportation service, they are the input services and the tax paid on those services is input credit and it can be adjusted against excise duty payable.

Input Services include:

  • Modernisation or renovation or repair of the output service provider’s premises.
  • Market research services
  • Advertisement
  • Sales promotion
  • Auditing
  • Accounting
  • Recruitment
  • Financing
  • Quality control
  • Training
  • Coaching
  • Computer networking
  • Share registry
  • Business exhibition
  • Credit rating
  • Legal services
  • Security
  • Transportation of inputs or capital goods to the manufacturing premises
  • Transportation to the place of removal

Services are excluded from Input Service:

The following services are excluded from input service if they are used for the following purposes:

  • Building construction
  • Civil structure construction
  • Part of building or civil structure construction
  • Structures to support capital goods
  • Port services in port and other ports
  • Industrial or commercial constructions
  • Architect service
  • Complex construction
  • Works contract
  • Motor vehicle general insurance
  • Renting of cab
  • Repair, restoration, reconditioning, decoration of a motor vehicle except three wheelers and those used for goods carriage.
  • Without transferring the possession and control, supplying the tangible goods.
  • Outdoor catering for personal use of employee, beauty treatment, cosmetic and plastic surgery, health services, club membership, health and fitness centre, health and life insurance, travel benefits provided to employees (LTA or Home Travel concession). CENVAT credit is not offered for services used for personal use.

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