Service Tax Credit Rules, 2002
1. Short title and commencement.-
1. (1) These rules may be called the Service Tax Credit (Amendment) Rules, 2004.
(2) They shall come into force on the date of their publication in the Official
(1) In these rules, unless the context otherwise requires,-
(a) “Act” means the Finance Act, 1994 (32 of 1994)
(a) “output service” means any taxable service rendered by the service provider
to a customer, client, subscriber, policy holder or any other person, as the
case may be;
(b) “input service” means any service received and consumed by a service
provider in relation to rendering of output service;
3. Service tax credit.-
(1) An output service provider shall be allowed to take credit (hereinafter
referred to as service tax credit) of the service tax paid on input service in
the following manner, namely:-
(a) where the input service falls in the same category of taxable service as
that of output service, service tax credit shall be allowed to be taken on such
input service for which invoice or bill or challan is issued on or after the
sixteenth day of August, 2002; (b) in any other case, service tax credit shall
be allowed to be taken on such input service for which invoice or bill or
challan is issued on or after the fourteenth day of May, 2003:
Provided that the output service provider shall be allowed to take such credit,
on or after the day on which he makes payment of the value of input service and
the service tax paid or payable as indicated in invoice or bill or challan
referred to in sub-rule (1) of rule 5.
(2) For the purposes of these rules, two services shall be deemed to be falling
in the same category of taxable service, if the input service and output service
fall in the same sub- clause of clause (105) of section 65 of the Act.
Provided that the taxable services defined in sub-clauses (zm) and (zp) of
clause 105 of section 65 of the Act shall be deemed to be falling within
the same category.
(i) A photography studio in course of providing photography services avails
service of processing labs for developing and processing of exposed film and
printing of photographs. In this case service provided, by the colour lab to
photography studio and by the photography studio to a customer, both fall in the
same category of service i.e. photography service. Therefore, photography studio
is entitled to take credit of service tax paid by the processing lab.
(ii) A stevedore hires dock labour from the port trust and provides such labour
to his client. In this case the service provided, by the port trust to stevedore
and by stevedore to client, both fall in the category of port service.
Therefore, stevedore is entitled to take credit of service tax paid by the port
(iii) An advertising agency may avail services of a photography studio and/or a
sound recording studio and/or a video tape production agency during the course
of rendering service to it’s client. Service provided by the photography studio
or the sound recording studio or the video tape production agency, as the case
may be, does not fall in the category of advertising agency service. Therefore,
advertising agency is not entitled to take credit of service tax paid by a
photography studio or a sound recording studio or a video tape production
(3) No service tax credit shall be allowed on input service received and
consumed in relation to rendering of such output service which is either exempt
from whole of the service tax leviable thereon or is not a taxable service,
except in the circumstances mentioned in sub-rules (4) and (5).
(4) Where a service provider avails credit on any input service and renders such
output services which are chargeable to service tax as well as exempted services
or non taxable services, as the case may be, then the service provider shall
maintain separate accounts for receipt and consumption of input service meant
for consumption in relation to rendering of output services which are chargeable
to service tax and the inputs service meant for consumption in relation to
rendering of output services which are exempted services or non-taxable
services, as the case may be. The service provider shall take credit only on
that portion of input service, which is intended for use in relation to
rendering output services, which are chargeable to service tax.
(5) In case the service provider, opts not to maintain separate accounts of
input service meant for consumption in relation to rendering of such output
services which are chargeable to service tax as well as exempted services or
non-taxable services, he shall be allowed to utilize service tax credit for
payment of service tax on any output service only to the extent of an amount not
exceeding thirty-five per cent. of the amount of service tax payable on such
(6) Service tax credit on the service provided in relation to telephone
connection shall be allowed only in respect of such telephone connections which
are installed in the premises from where output service is provided.
4. Utilisation of service tax credit.-
(1) The service tax credit availed on input service may be utilised for payment
of service tax on the output service.
Provided that while paying service tax on the output service, the service tax
credit shall be utilized only to the extent such credit is available on the last
day of a month, for payment of service tax relating to the month or in case
where the assessee is an individual or proprietary firm or partnership firm, to
the extent such credit is available on the last day of the quarter for payment
of service tax relating to the quarter.
(2) Refund of service tax credit availed on input service shall not be allowed
under any circumstance.
4A. Transfer of service tax credit.- If an output service provider shifts
his establishment to another site or his establishment is transferred on account
of change in ownership or on account of sale, merger, amalgamation, lease or
transfer of establishment to a joint venture with the specific provision for
transfer of liabilities of such establishment, then, the output service provider
shall be allowed to transfer the service tax credit lying unutilized in his
account to such transferred, sold, merged or amalgamated establishment.
5. Documents and accounts.- (1) The service tax credit shall be availed
on the basis of an invoice or bill or challan issued by the service provider of
input service on or after 16th day of August 2002, indicating clearly the serial
number of document, date of issue, description and value of the input service,
the service tax paid /payable, service tax registration No. and address of input
(2) The output service provider availing service tax credit shall take
reasonable steps to ensure that the input services in respect of which he has
availed the service tax credit are the services on which the service tax, as
indicated in the documents on the basis of which credit is availed, has been
Explanation: The output service provider availing service tax credit
shall be deemed to have taken reasonable steps, if he satisfies himself about
the identity and address of the input service provider, issuing the documents on
the basis of which the service tax credit is availed and that the details
regarding description and value of input service received by him has been
furnished correctly in the documents.
(3) The output service provider availing service tax credit shall maintain
proper records in which the relevant information regarding the Sl. No. and date
of document on which service tax credit is availed, service tax registration No.
and name of the input service provider, description and value of input service,
service tax credit availed, service tax credit utilized for payment of service
tax on output service shall be recorded. The burden of proof regarding the
admissibility of service tax credit shall lie upon the person taking such
(4) The output service provider availing service tax credit shall submit to the
Superintendent of Central Excise, a return in the form annexed to these rules
along with the Form ST-3 as specified in rule 7 of the Service Tax Rules , 1994.
6. Recovery of service tax credit.- Where the service tax credit has been
wrongly availed or utilized , whatsoever, such credit along with interest shall
be recoverable from the person availing such service tax credit and the
provisions of section 73, 75, 76 and 78 of the Act shall apply mutatis mutandis
for effecting such recoveries.
(see sub-rule (4) of rule 5)
Return under rule 5 of the Service Tax Credit Rules, 2002
(For the period from________ to________)
||Date and no. of document on which credit is availed
||Details of input service provider
||Details of input service
|ST regd. No.
Service tax credit
(a) Description of output services in relation to rendering of which the input
services are consumed:
(b) Whether separate account is maintained for receipt and consumption of input
service meant for consumption in relation to rendering of output services which
are taxable or exempted or non-taxable service: Yes/No
|Name and signature of the assessee or
his authorised representative”.
[this page last updated on 20.5.2007]
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