Document for taking credit on input services – Pure (Poor) Agents!
AS per Rule 5 (2) of the Service Tax (Determination of Value) Rule 2006, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service shall be excluded from the value of the taxable service subject to certain conditions.
There may be many cases where the service provider also acts as pure agent in respect of services other than those rendered by him. To give an example, a CHA service provider may also procure the service of a cargo handling service as pure agent. As per rule 5(2), this value of cargo handling service is to be excluded from the value of CHA. The cargo handling service provider pays service tax and bills it to the CHA. The CHA in turn issues a consolidated bill for his CHA service with service tax and also for the cargo handling charges and collects the total amount from the client.
When the service recipient takes credit on both CHA and cargo handling service, it seems that many in the field formations are objecting to the CENVAT Credit on the ground that in respect of cargo handling, the bills issued by the cargo handling service provider do not contain the name and address of the service receiver (these bills are raised in the name of CHA) and no credit on this amount can be taken based on the consolidated bill raised by CHA as he is not the service provider as far as the cargo handling is concerned.
Can the Board do something?