Utilization of Cenvat credit on specified 17 input services, when they are used for exempted as well as taxable services -reg. - Service Tax - F.No. 137/203/2007-CX.4

Utilization of Cenvat credit on specified 17 input services, when they are used for exempted as well as taxable services -reg. F.No. 137/203/2007-CX.4 Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs Dated : October 1, 2007 Subject : Utilization of Cenvat credit on specified 17 input services, when they are used for exempted as well as taxable services -reg. Please refer to letter F.No. IV/16-385/CCO/MCX-I/2005 dated 5th September, 2005 from the Chief Commissioner of Central Excise, Mumbai-I Zone on the above subject. The CC, Mumbai-I had sought clarification that while sub-rule (5) of Rule 6 of Cenvat Credit Rules, 2004 allows full credit on the 17 specified services (unless they are used for providing exempted services only) whether the restriction of credit utilization upto 20% would still apply to credit relating to such services. 2. The matter has been examined. The basic purpose of identifying 17 specified services for special dispensation is that these services are used in relation to the entire activities of the service provider and cannot be co-related or apportioned with any individual service (whether taxable or exempted) provided by such service provider. For example service tax paid on construction of an office of a service provider (who provides more than one service) can not be linked with any particular service provided by him as it may be using it for various purposes and for all services provided by him. Thus, these services are similar in nature to capital goods which is a part of fixed assets/cost that cannot be apportioned for maintaining separate records. It is for this reason that there is no restriction in taking and utilization of credit on these services, so far as they are used for providing some taxable services. If the restriction of 20% is applied to these services also, this basic purpose would be defeated. As regards, 'taking' of credit is concerned, that is anyway available to all input services and there would not have been any reason to select these 17 services for placing them under sub-rule (5). they have been placed in a separate sub-rule [i.e. sub-rule (5)] because in respect of utilization of credit of tax paid on these services, the restriction of 20% does not apply, while the restriction applies in all other cases. In conclusion the credit taken in respect of the services can be utilized for payment of service tax without any limit. 3. Aforesaid views of the Board may be communicated to field formations please. (Gautam Bhattacharya) Commissioner (ST) Central Board of Excise Customs