Output service – Cenvat Credit Rules amended
As per Rule 2(p) of the Cenvat Credit Rules,
(p) "Output service" means any taxable service provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions ‘provider’ and ‘provided’ shall be construed accordingly;
Explanation.- For the removal of doubts it is hereby clarified that if a person liable for paying service tax does not provide any taxable service or does not manufacture final products, the service for which he is liable to pay service tax shall be deemed to be the output service.
Now this explanation is removed. What are the implications? DGST will immediately give a clarification and some Chief Commissioners will also come up with clarifications, confusing the issue totally. The Board’s press statement affirms,
Rule 5 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 specifically state that the services received from outside India are not treated as output services for the purpose of input credit availment by the recipient of services. In view of this rule, the said explanation is being omitted.
But this explanation has implications elsewhere as in the case of Service Tax on Goods Transport, where it is possible that the recipient who is required to pay Service Tax may not be a manufacturer or Service Provider. What happens then? We will explain in the days to come. Already we have received mails whether GTA Service Tax cannot be paid from Credit account.
Notification No. and 11 – Service Tax dated 19th April, 2006