Input Service Distributor also a Service Provider – Benefit of 6/2005-ST, whether available?
This is an Audit objection communicated to us by a harried Input Service Distributor.
M/s XYZ Ltd. is registered as Input Service Distributor and distributes the credit of Input services viz. Telephone charges etc. to the registered manufacturer M/s XYZ Ltd.
M/s XYZ Ltd. have also rented a part of their registered office premises to their group company M/s ABC Ltd. and have claimed the benefit of small scale exemption in terms of notification 6/2005-ST dated 01.03.2005 in the matter of payment of Service Tax in respect of the Service category viz. ‘Renting of immovable property'.
The Audit has come knocking and says that the exemption cannot be enjoyed because M/s XYZ Ltd. have availed the Cenvat Credit of service tax paid on input services.
Clause 2(ii) of the Notification 6/2005-ST reads -
(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on any input services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to as the said rules), used for providing the said taxable service, for which exemption from payment of service tax under this notification is availed of;
Obviously in the instant case, the Input Service Distributor has not availed any Cenvat credit for providing the taxable service of ‘Renting of immovable property' but taken/received the credit for the purpose of distributing it to its manufacturing concern.
However, the Audit objection is getting an overwhelming response from the field formations, as always, and is sure to overtake the GTA fiasco in the days to come.
I request that DDT highlight this objection in its column and request Netizens to react to the same.
Notification NO. Dated: October 16, 2008