Chapter-3 Indirect Taxes (Service Tax)training.bsnl.co.in/digital_library_source... · Chapter-3...

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©BSNL, India For Internal Circulation Only 1

Chapter-3

Indirect Taxes (Service Tax)



SERVICE TAX

Service tax is imposed under Finance Act, 1994 as amended from time to time. There

is no Service Tax Act.

Rate of Service Tax 14% w.e.f. 01-06-2015 inclusive of EC & SHEC & 0.5% Swachh Bharat Cess.

Determination of point of taxation in case of continuous supply of service (1-4-

2011)

The point of taxation shall be:-

(a) the time when the invoice for the service provided or to be provided is issued:

Proviso:- where the invoice is not issued within 14 days of the completion of the

provision of the service, the point of taxation shall be date of such completion

(b) in a case where the person providing the service receives a payment before the

time specified in clause (a), the time, when he receives such payment, to the extent of such payment.

Explanation 1:- For the purpose of this rule, where the provisions of the whole or

part of the service is determined periodically on the completion of an event in terms of a contract, which requires the service receiver to make any payment to service

provider, the date of completion of each such event as specified in the contract shall

be deemed to be the date of completion of provision of service

Explanation 2:- Wherever any advance by whatever name known, is received by the

service provider towards the provision of taxable service, the point of taxation shall be

the date of receipt of each such advance

Provisions come to effect from 1-7-2011

Wherever provision of service is completed or invoice issued up to 30-6-2011, the

point of taxation shall, at the option of tax payer, be the date on which the payment is received or made as the case may be.

[In BSNL telephone bills are issued during the month for services provided up to

the end of previous month. Hence for the bills issued from August, 2011

onwards, service tax payable by BSNL on the basis of billed amount + Service

tax collected on the bills issued up to July, 2011 to the central Excise department

in the following month. i.e. for the bills issued in August, 2011, service tax

payable on the basis of billed amount of August, 2011 (+ Service tax collected

during August, 2011 on the bills issued up to July, 2011) to the central excise

department on or before 6th of September, 2011 electronically]

* TDS (income tax) will be on value of services / bill amount without including

the service tax amount. ( Chapter XVII-B of the Act.) if the service tax amount

is shown separately by the service provider.



Tax deduction at Source (TDS) under section 194-I of the Income Tax Act 1961 on

the Service Tax components

It may be ensured that TDS at the applicable rates on the actual amount of rent

(exclusive of service tax), may be recovered from the payment made by BSNL to

other and also accept similar recovery of TDS from the payment due to BSNL from

others with immediate effect in accordance with the provision of section 194-I of

Income Tax Act.

BSNL HQ No.1001-19/2003-2004/C.TAX/BSNL/324 dt. 10-6-2008)

* Service tax is payable on gross amount charged by service provider for service

provided or to be provided. Thus, tax is payable as soon as advance is

received.(w.e.f. 13-5-2005)

* If gross amount charged by service provider is inclusive of service tax (i.e.

service tax not charged separately in invoice), value of taxable service will be

calculated by back calculations such that with addition of service tax payable,

the total is equal to the gross amount charged. („Value of taxable service‟ plus

service tax payable is equal to „gross amount charged‟) [section 67(2)]

* Gross amount charged for taxable services can be before, during or after

provision of service [section 67(3)]

* Service tax is payable on value of taxable service and not on entire value of

contract. Service tax is not payable on value of goods and material supplied to

the service recipient while providing service. (Such exclusion is permissible

only if Cenvat credit on such goods and material is not taken). There should be

evidence about its value. Option has also been given to the person liable to pay

service tax @ 4% (1-4-2008) on the gross amount charged for the works

contract.

In case of some services, service tax is payable at lower rates, i.e. partial

abatement is available from gross value. The lower rate is applicable if the

service provider does not avail cenvat credit of duty/tax on inputs, input

services and capital goods.

[Example construction service, goods transport agency etc.]

* Small service providers whose turnover less than Rs.Ten lakhs per annum

(w.e.f. 1-4-2008) are exempt from service tax. This small service providers

shall not avail the CENVAT credit of service tax paid on any input services.

The exemption shall apply to the aggregate value of all such taxable services

from all premises of service provider taken together and not separately for

each premises or each services.



Person providing taxable service in excess of Rs. Nine lakhs per annum (but less than

Rs. Ten lakhs ) [w.e.f. 1-4-2008] will have to register with Superintendent of Central

Excise under Service Tax provisions , though they will be eligible for exemption if

turnover is less than Rs.Ten lakhs per annum.

Person liable to pay Service tax

In most of the cases, service provider, i.e. person who is providing taxable service is

liable to pay service tax.

Exceptions:

*In relation to taxable service provided or to be provided by any person from a

country other than India and received by any person under section 66A of finance Act,

service tax is payable by recipient of service [rule2(1)(d)(iv)]. In such case, person

receiving the service will have to register.

*In case of services of Goods transport Agency (GTA), service tax is payable by

consignor/consignee who is paying freight [rule2(1)(d)(v)] [However, the

consignor/consignee is not entitled to avail exemption available to a small service

provider]

Service Tax on GTA will have to be paid by cash only and not through Cenvat Credit

w.e.f. 1-3-2008.

*In case of sponsorship service provided to a body corporate or firm located in India,

the body corporate or firm receiving such sponsorship service will be liable to pay

service tax [rule 2(1)(d)(vii)]. If the recipient of sponsorship service is located outside

India, service tax is required to be paid by the service provider and not by the

recipient. The body corporate or firm paying such service tax will be eligible to avail

Cenvat credit of the service tax paid, on the basis of TR-6 challan by which the tax is

paid w.e.f.1-5-2006. It may be noted that when person receiving service is liable to

pay service tax, he is not entitled to exemption of Rs.Ten lakhs which is available to a

small service provider.

Procedures

*There are no prescribed form of records. The records maintained by assessee

including computerized data maintained by assessee in accordance with various other

laws are acceptable [rule 5(1)]

Substituted Rule 5 (2)



Every assessee shall furnish to the Superintendent of Central Excise at the time of

filing of return for the first time or the 31st day of January, 2008, whichever is later, a

list in duplicate, of

(i) all the records prepared or maintained by the assessee for accounting of

transactions in regard to :-

(a) providing of any service, whether taxable or exempted;

(b) receipt or procurement of input services and payment for such input

services;

(c) receipt, purchase, manufacture, storage, sale or delivery, as the case

may be, in regard of inputs and capital goods;

(d) other activities, such as manufacture and sale of goods, if any

(ii) all other financial records maintained by him in the normal course of

business”

Newly inserted Rule 5A

Access to a registered premises

(1) An officer authorized by the commissioner in this behalf shall have access to

any premises registered under these rules for the purpose of carrying out any

scrutiny, verification and checks as may be necessary to safeguard the interest

of revenue

(2) Every assessee shall, on demand, make available to the officer authorized

under sub-rule(1) or the audit party deputed by the commissioner or the

Comptroller and Auditor General of India, within a reasonable time not

exceeding fifteen working days from the day when such demand is made, or

such further period as may be allowed by such officer or the audit party, as

the case may be:-

(i) the records as mentioned in sub-rule (2) of rule 5;

(ii) trial balance or its equivalent; and

(iii) the income-tax audit report, if any, under section 44AB of the

income tax Act, 1961 (43 of 1961), for the scrutiny of the office or

audit party, as the case may be

(Dept. of Revenue Notification No.45/2007-Service Tax dt.28-12-2007,

communicated vide BSNL HQ No.700-04/2005/Taxation/BSNL/Vil.II/51 dt. 30-1-

2008)

*Rule 5(3) makes it obligatory for an assessee to preserve records at least for a period

of five years.



Registration

Following will require registration as per the rules

(a) Input Service distributors

(b) Service provider who is exempt but whose aggregate value of taxable service

exceeds Rs. Nine lakhs.

A person should register within 30 days from date of commencement of the business

of providing taxable service. They have to apply for registration in form ST-1, along

with the following documents:-

(i) copy of PAN (ii) proof of residence (iii) constitution of applicant

Provisional payments

As per rule 6(4A) of Service Tax Rules (w.e.f. 16-6-2005), you can pay tax on higher

side. You can yourself adjust the excess tax paid against tax liability of subsequent

period. After adjustment, you should inform Superintendent of Central Excise within

15 days from date of adjustment. Note that such adjustment is possible only when

excess tax was paid as details of payments received at other offices or premises was

not received in time. Excess payment was for some other reason; such self adjustment

will not be permissible.

As per rule 6(3) of Service Tax rules, if any amount (partly or fully) is refunded to the

person who had paid the amount on account of service not being provided, the excess

service tax paid can be adjusted on pro rata basis, against future payments of service

tax liability. Such adjustment is permissible only if the proportionate service tax is

also refunded to the person from whom the amount was received

Invoice by service provider

Assessee should prepare invoice in respect of his services. The invoice should be

prepared within 14 days from date of completion of taxable service or receipt of

payment towards the value of taxable service, whichever is earlier.

As per rule 4A(1) of Service Tax Rules, the invoice/challan/Bill should be signed by

authorized person of provider of input services. The invoice/Bill/challan should be

serially numbered

The Invoice should contain following details:- (section 12 A Central Excise Act)

(1) Name, address and registration number of person providing taxable service

(2) Name and address of person receiving taxable service

(3) Description, classification and value of taxable service provided or to be provided



(4) Service tax payable on taxable service

The rule does not make mention of date, but actually, date should be mentioned

Service tax and education cess should be shown separately in invoice. Education cess

should be paid by TR-6 challan by showing separate account head in TR-6 challan,

indicating appropriate code.

W.E.F. 1-3-2007, Cenvat Credit can be taken only if all details as prescribed in Rules

are available in invoice. If even one detail as required under Rules is missing,

permission from Assistant/Deputy Commissioner will be required.

W.E.F. 1-4-2007, Invoice must contain excise or service tax registration number of

person issuing the invoice. Otherwise, Cenvat Credit will not be available. Invoice

shall also contain address of the jurisdictional Central Excise Division.

Payment of Tax

The service tax is payable 5th of the month following the month in which payments

are received towards value of taxable services except in March. Service tax on value

of taxable services received during month of March is required to be paid by 31st

March.

Assessee should first utilize Cenvat credit available. Balance amount is payable in

cash.

TR-6 challan: - the tax is payable by a Yellow colour challan in the bank where excise

duty is accepted. The major account head is „044‟. In addition, separate accounting

code has been given to each service.

Rule 6(2A) provides that cheque of proper amount should be deposited with bank on

or before due date. If last day of payment and filing return is a public holiday, tax can

be paid and return can be submitted on next working day.

Mandatory e-payment

Proviso to Rule 6(2) of Service Tax Rules makes e-payment mandatory for payment

of duty by all assesses who have paid Service Tax of 1 lakh or more more in cash during the preceding financial year [ Rs.50 lakhs w.e.f. 1-10-2006, Rs.10 lakhs or

more w.e.f. 1-4-2010]

Interest for late payment service tax



In case of delayed payment of service tax, there is mandatory payment of simple

interest under section 75 for period which the payment is delayed. The interest rate is

13% w.e.f. 10-9-2004. Department is not required to issue any show cause notice or

demand, as interest payment is automatic by virtue of statutory provisions.

Returns

Half yearly return in form ST-3 in triplicate within 25 days of the end of the half –

year. Half –year means 1st April to 30th September and 1st October to 31st March of

financial year. The return should be accompanied by TR-6 challans, evidencing

payment of duty. If assessee is providing more than one taxable service, he should file

only one return. However, details of each taxable service shall be shown separately. If

no service is provided in a particular period, NIL return should be submitted. (as long

as registration certificate is valid)

E-filing of returns: w.e.f 01-10-2011 the e-filing of the service tax returns

is mandatory for every assessee by notification No:43/2000-Service tax, New delhi.

Earlier e-payment of taxes has been made mandatory w.e.f. 1-4-2010 in case of assesses who had paid service tax of Rs.Ten lakhs or more in the preceding financial

year (either in cash or by utilizing Cenvat Credit or both)

W.E.F. 11-5-2007, the late fee for late filing of return are as follows:-

(Rule 7C)

Delay up to 15 days Rs.500

Delay up to 30 days Rs.1000

Delay beyond 30 days Rs.1000 plus Rs.100 per day of delay

beyond 30 days, maximum Rs.2000 prior to 08-04-2011 and Rs,20,000 after the

date.

Revised return:-

Rule 7B of Service Tax Rules has been inserted w.e.f. 1-3-2007 to allow an assessee

to rectify mistakes and file revised return within 60 days from the date of filing of the

original return.

Assessment of Service Tax

Like Income tax and central excise, service tax assessment is basically self-

assessment. Show cause cum demand notice can be issued within one year. Notice

beyond one year (within five years) can be issued only if there if fraud, suppression of

facts, willful misstatement or collusion.

Amount collected representing as service tax must be paid to Government

If a person liable to pay service tax collects from recipient of taxable service, an

amount representing as service tax, in excess of service tax assessed or determined



and paid on any taxable service, the excess amount must be deposited forthwith with

government [section 73A(1)]

If a person collects from any person an amount representing it as service tax when not

required to be collected, he shall forthwith deposit the amount so collected to

Government [section 73A(2)]

Really, service tax provisions do not „require‟ any tax to be collected. Tax is

„required‟ to be paid, whether or not collected.

Penalties

If service tax is not paid or belatedly paid, penalty shall be imposed, which will be minimum Rs.100 per day during which such failure continues or @1% per month,

whichever is higher, starting with the first day after due date till date of actual

payment of outstanding amount. Mercifully, the penalty cannot exceed 50% the

service tax which was payable. In addition, of course, service tax and interest is payable (section 76).

Penalty for not obtaining registration: If a person who is liable to pay service tax, or required to take registration, fails to take registration in accordance with the

provisions of section 69 or rules, he shall be liable to pay a penalty which may extend

to Ten thousand rupees or two hundred rupees for every day during which such failure

continues, whichever is higher, starting with the first day after the due date, till the date of actual compliance [section 77(1)]

Penalty for non-maintenance of books of account and documents : If a person fails to keep, maintain or retain books of account and other documents as required in

accordance with the provisions of this chapter or the rules made there under, he shall

be liable to a penalty which may extend to Ten thousand rupees [section 77(1)(b)]

Penalty for not furnishing information required: If a person fails to furnish

information called by an officer in accordance with the provisions of this chapter or

rules made there under; or fails produce documents called for by a Central Excise Officer in accordance with the provisions of this chapter or rules, he shall be liable to

pay a penalty which may extend to Ten thousand rupees or two hundred rupees for

every day during which such failure continues, whichever is higher, starting with the

first day after the due date, till the date of actual compliance [section 77(1)©(i) and 77(1)©(ii)]

Penalty for non-appearance before officers on issue of summons : If a person fails

to appear before the Central Excise Officer, when issued with a summon for

appearance to give evidence or to produce a document in an inquiry, he shall be liable

to a penalty which may extend to ten thousand rupees or two hundred rupees for every

day during which such failure continues, whichever is higher, starting with the first


©BSNL, India For Internal Circulation Only

10

day after the due date, till the date of actual compliance [section 77(1)©(iii) w.e.f. 10-

5-2008]

Penalty for failure to pay tax electronically when required : If a person, who is

required to pay tax electronically, through internet banking, fails to pay the tax

electronically, shall be liable to a penalty which may extend to ten thousand rupees

[section 77(1)(d) w.e.f. 10-5-2008]

Penalty for issuing incorrect invoice or not accounting invoices in his books of

account: If a person issues invoice in accordance with the provisions of the Act or

rules made there under with incorrect or incomplete details or fails to account for an

invoice in his books of account, shall be liable to a penalty which may extend to ten

thousand rupees [section 77(1)(e) w.e.f. 10-5-2008]

Residual penalty for contravention of Act or Rules : Penalty for contravention of

any provision of the chapter or rules (of service tax) for which separate penalty has

not been provided shall be up to Rs.10000 [section 77(2) w.e.f. 10-5-2008]

Where any tax is not levied or paid erroneously refunded, the person shall be liable to

pay penalty which shall not be less than of service tax but can be up to twice the

amount of service tax amount of tax not levied or not paid or erroneously refunded

(section 78). [The penalty will be reduced to 25%, if tax, interest and penalty is paid

within 30 days from date of receipt of order of Central Excise Officer.]

Penalty under both sections 76 and 78 cannot be imposed: As per fifth proviso to

section 78 (inserted vide Finance Act, 2008), if penalty is payable u/s 78, penalty u/s

76 shall not apply

As per section 80, penalty under sections 76, 77 or 78 can be waived if assessee

proves that he had reasonable cause for the failure.

Appeals

If adjudication order is passed by authority lower than Commissioner of Central

Excise, first appeal will be with Commissioner (Appeals) under section 85(1) within

three months from date of receipt of order of adjudicating authority.

Second and final appeal is with Appellate Tribunal (Customs, Excise and Service Tax

Appellate Tribunal-CESTAT) under section 86(1). Appeal is required to be filed

within three months.



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The appeal of assessee should be in form ST-5 in quadruplicate and should be

accompanied by equal number of copies of order appealed against. One of the copies

should be certified copy of order [rule 9(1)].

Complete and correct informations in Service Tax challan

Service Tax authorities has brought to notice of this office that a large number

Service Tax challan deposited by BSNL are either not mentioning or wrongly mentioning the informations like Account code, Assessee code, Location code etc.

Due to absence or wrong mention of informations as mentioned above, proper

accounting of the deposit is being affected.

Therefore, it should be ensured that Service Tax challan are filled by BSNL units completely and correctly. It is also intimated that all service Tax payments, after

availing proper CENVAT credit, should be made through yellow colour TR-6 challan

only. It should be brought to the notice of all field units under your control.

(BSNL HQ No.700-04/2005/CA-III/BSNL/Vol.II dt. 12-8-2005)

Printing of Service Tax Registration number and PAN number of BSNL on the

bills issued by BSNL offices

Kindly refer to this office letter no.700-46/2003-CA-III/BSNL/KW dated 19-

1-2004, wherein instructions were issued that necessary action to print the Service

Tax registration number of the concerned office and the Permanent Account Number (PAN) of BSNL-AABC B5576G, on the Telephone bills/demand notices/invoices,

challans etc.

It is reported that some of the BSNL offices are not indicating these numbers

on the bills, demand notices, invoices, challans etc. being issued by them. Since our customers need the Service Tax registration number for claiming the

input credit and PAN no. will be required for Income Tax purposes, it is re-iterated

that that necessary action to print the Service Tax registration number of the

concerned office and the Permanent Account Number (PAN) of BSNL –AABC B5576G, on the Telephone bills/demand notices/invoices, challans etc. may be taken

immediately. It is mandatory to indicate the Service Tax registration number on

bils/challans/Invoices etc. as per rule 4(1) of the Service Tax rules, 1994.

Where manual bills, demand notes, invoices etc. are issued, the Service Tax registration number of the concerned office and the Permanent Account Number

(PAN) of BSNL-AABC B5576G, may be indicated by Rubber Stamp.

(BSNL HQ No.700-04-2005/Taxation/200 dt. 12-9-2006)

The following (which were exempted from service tax up to 31-5-2007) are

chargeable to Service Tax w.e.f. 1-6-2007

(i) Interconnect Usage charges (ii) Port charges

(iii) Infrastructure charges

(iv) Rental for junction links (charges for using junction links of the BSNL from one

exchange to another) [M.O.F. Dept. of Revenue No.149/2/2004-CX.4 (Circular no.91/2/2007-Service Tax)

dt. 12-3-2007]



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[Commissioner (Service Tax) New Delhi, Central Board of Excise and Customs lr.

No.153/Com(ST)/2007 dt. 1-5-2007] It, is therefore, clarified that for the period prior to the date (i.e. 1-6-2007) when the amended definition of “telecommunication

service” comes into effect, service tax is not applicable to IUC. Accordingly, all

contrary circulars/instructions issued in the matter are withdrawn. Pending cases may

be decided in terms of this clarification. [Para 5 of M.O.F. Dept. of Revenue (CBEC) lr. No.149/2/2004-CX.4 (circular

no.91/2/2007-Service Tax ) dt. 12-3-2007]

In view of the clarification issued at para-5 by the CBEC in the said circular all pending cases regarding imposition of service tax on IUC charges may be taken up

with the concerned service tax authorities for the withdrawal of the demand for

payment of service tax on IUC charges, interest and penalty thereof. If any payment

made earlier along with interest & penalty may kindly be reviewed and claim may be preferred to the service tax authorities for refund of the same

(BSNL HQ No.700-04/2005/Taxation/BSNL/VOL-II/434 dt. 15-3-2007)

Service Tax issues relating to hiring of Cabs The service provided by rent-a-cab operator attracts service tax. However it is

intimated by the Central Excise Department that many of the cab operators are not

registered with the Department and are not paying service tax, as required.

The taxable service providers required to take registration and obtain 15 digits service tax code number and issue invoices/challan/bills. Such documents should be serially

numbered and also contain the name and address of the service provider, service

receiver, description of service, value of service and service tax payable thereon.

It may be ensured that the cab operators hired by BSNL offices are registered with the Central Excise Department and also issue invoice/bill/challan in the manner stated

above and pay service tax.

(BSNL HQNo.700-04-2005/Taxation/BSNL/Vol-II/456 dated 28-3-2007)

But, w.e.f. 01-04-2011, the Central Government has amended the definition of „input

service‟ under Rule 2(l) of Cenvat Credit Rules, 2004 vide Notification No. 3/2011 –

CE(NT) dated 01-03-2011 and again vide Notification No. 18/2012 – CE(NT) dated

17-03-2012 (w.e.f. 01-04-2012). The effect of the amendment is that rent-a-cab service has been specifically excluded from the definition of „input service‟ and hence

cenvat credit is generally not available. Cenvat Credit is available only when rent a

cab service could be related to a motor vehicle which is capital good for them. In

other words, when a motor vehicle designed to carry passengers including their chassis, registered in the name of provider of service, when used for provided output

service of- (i) transportation of passengers; or (ii) renting of such motor vehicle; or

(iii) imparting motor driving skills, then cenvat credit can be availed

Service Tax on commission amount payable to Agents/Distribution 1. Business Auxillary services, inter alia covers promotion or marketing of

service provided by client, provision of service on behalf of client, any service

incidental thereto and service provided by a commission agent. Therefore it is to

clarify that service provided by distributors/agents of BSNL as listed in the “Sale and distribution policy 2006” on commission basis would be taxable under the Business

Auxillary Services.

2. For small agents/distributors, Govt. had earlier prescribed threshold exemption

limit of Rs.4,00,000/- which has now been enhanced to Rs.8,00,000/- with effect from



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1-4-2007 by amending notification no.6/2005-Service Tax dated 1-3-2005 vide

notification no.4/2007-Service Tax dated 1-3-2007. From 01-04-2008 the exemptin limit is enhances upto Rs.10,00.000/- This threshold exemption is not mandatory. It is

optional only.

3. From 01-07-2012 by notification No: 25/2012-ST dated 20.06.2012 issued by

Department of Revenue, Ministry of Finance, Government of lndia the services of franchisee for same of SIM cards and sale of recharge vouchers including e-recharge

including e-pin and e-top is exempted from service tax.

Annexure

Taxable service to be provided or credit to be distributed on invoice, bill or challan 4A. (1) Every person providing taxable service not later than fourteen days from the

date of completion of such taxable service or receipt of any payment towards the

value of such taxable service, which ever is earlier shall issue an invoice, a bill or, as

the case may be, a challan signed by such person or a person authorized by him in respect of such taxable service provided or to be provided and such invoice, bill or, as

the case may be, challan shall be serially numbered and shall contain the following,

namely:-

(i) the name, address and the registration number of such person; (ii) the name and address of the person receiving taxable service;

(iii) description, classification and value of taxable service provided or to be

provided; and

(iv) the service tax payable thereon; The rule does not make mention of date, but actually, date should be mentioned in the

invoice / bill.

Provided that in case the provider of taxable service is a banking company or a financial institution including a non-banking financial company, or any other body

corporate or any other person, providing service to a customer, in relation to banking

and other financial services, an invoice, a bill or, as the case may be, challan shall

include any document, by whatever name called, whether or not serially numbered, and whether or not containing address of the person receiving taxable service but

containing other information in such documents as required under this sub –rule:

Provided further that in case the provider of taxable service is a goods transport agency, providing service to a customer, in relation to transport of goods by road in a

goods carriage, an invoice, a bill or, as the case may be, a challan shall include any

document, by whatever name called, which shall contain the details of the

consignment note number and date, gross weight of the consignment and also contain other information as required under this sub-rule:

Provided also that where any payment towards the value of taxable service is not

received and such taxable service is provided continuously for successive periods of time and the value of such taxable service is determined or payable periodically, an

invoice, a bill, or as the case may be, a challan shall be issued by a person providing

such taxable service, not later than fourteen days from the last date of the said period

(BSNL HQ No.1001-26/2002/Taxation/BSNL/568 dt. 25-5-2007)

Sub: Accounting of the difference arisen due to Rounding off of the Total Sale

Price of prepaid items



14

1. Doubts have been raised by the Circles regarding procedure to be followed for

accounting the difference between the total amount of prepaid items (i.e. amount of

card

value, Service Tax, Education Cess & Higher Education Cess) and the rounded off

total Sale price of such prepaid items.

2. To account for the difference i.e. gain or losses as mentioned above in respect of

the

prepaid items i.e. recharge vouchers, top up cards etc. under-mentioned procedure

shall be followed:

2.0 The following accodes are allotted to account for the amount of gain or loss on

rounding:

1131900 – Gain / loss on rounding

4131900 – Gain / loss on rounding

2.1 The value of the card/voucher/coupon, Service Tax, Education Cess & Higher

Education Cess will be accounted as per actual (with fraction of a rupee if any)

against the concerned accode of income schedule and liability schedule.

2.2 The difference between the total value of prepaid items as accounted against

concerned accode mentioned in Para 2.1 above and the total sale price (rounded off)

of the said item shall be accounted against accode 1131900/4131900. If the total sale

price is more than the value accounted against the concerned accodes mentioned in

Para 2.1 above the difference shall be credited to accode 1131900/4131900. Where

the total sale price is less than total value mentioned in Para 2.1 above the difference

shall be debited to accode 1131900/4131900.

2.3 The process of debiting and crediting the accode 1131900/4131900 with the

difference due to rounding off of total sale price will continue till the close of the

financial year. While finalizing the annual accounts of the Circle the net amount lying

under accode 1131900/4131900 at the close of the financial year shall be debited to

accode 1741800/4711800 – General Expense if net amount under 1131900/4131900

is a debit balance. However if the net amount under 1131900/4131900 is a credit

balance the same shall be credited to accode 1410199/4410104 – „Other Receipts‟.

2.4 The Service Tax, Education Cess & Higher Education Cess will be accounted as

per

actual (with fraction of a rupee if any). However, while making payment to Service

Tax

Authority rounding off is to be done at the last stage only.



15

(BSNL HQ No 500-31/2007-08/CA-I/BSNL Dated, the 06-02-2008)

Minutes of the 23rd Meeting of the Audit Committee of the BSNL Board

While considering the Annual Financial Statement and Auditor‟s report of BSNL for

the financial year ended 31-3-2008 the Audit Committee of BSNL Board expressed

concern and has given following recommendations for implementation

1. Deposit of all the Service tax be ensured within prescribed time by all the

circles

2. Internal Control procedure for availment of Cenvat credit

In view of above you are requested to go thorough the following and review the

position of each and every assessee of your circle and report compliance

(1)Deposit of all the service tax be ensured within prescribed time by all the

circles:

The guidelines issued vide corporate office letter no.1002-75/2007/taxation/713 dated

5-10-2007 may kindly be referred to. In the said letter along with other instructions

SSAs/Mobile Units were also advised to follow either of the following two options

available under Service Tax Rule 1994 so that delayed/short payment of service tax

may be avoided.

(a) Option-I Rule 6(4):- Provisional Assessment for making payment of service

tax on provisional basis

(b) Option-II Rule 6(4A) & 6(4B): Self adjustment of excess paid service tax in

the succeeding month

At para-4 of the said letter circle IFA was advised to devise their own methods for

monitoring the action by the SSAs/Mobile units. Methods devised in this regard may

kindly be intimated.

(2)Internal control procedure for availment of Cenvat Credit

(a)Procedure for availment of Cenvat Credit on input/Input services

From 1-4-2008 procedure for availment of Cenvat Credit for input and input services

has been modified through the amendment of Rule 6(3) of the service tax rule.

Corporate office letter no.700-04/2005/Taxation/BSNL/Vol.II/KW/152 dated 24-3-

2008, in this regard may be referred to. Circles have been advised to exercise the

option beneficial to BSNL. Circles are requested to check whether option has already

been exercised or not by each and every assessee. IFAs of SSAs may review the

option at the beginning of every year and switch over to the more beneficial option.



16

(b)Non maintenance of proper records/Documents while availing the Cenvat credit:-

The documents and the accounts to be maintained for the availment of Cenvat credit

has been prescribed in rule 91(1) of the Cenvat Credit Rules 2004. ATDs are not

being treated as proper document by Service Tax authorities for availment of cenvat

Credit. Photocopies of invoices/bills etc. are also sometimes not accepted. As a result

of which Cenvat Credit already availed are disallowed by the Service Tax authorities

and treated the cases as short payment as well as delayed payment of service tax and

placed the demand for payment of service tax along with interest and penalty.

Hence care must be taken to ensure that the documents on which Cenvat Credit is

taken complies with Rule 9(1) of Cenvat Credit Rules 2004

© Avoidance of litigation in Service Tax:- It has also been observed that Show Cause

Notices are being issued to BSNL assessee regarding i)short /delayed payment of

service tax ii) Non compliance of Service tax Rules iii)wrong availment of Cenvat

credit. Demands are being placed for payment of such alleged short payment of

service tax along with interest and penalty.

Due to non compliance/non submission of reply of the SCN on time and non

submission of records asked for at the time of hearing, the demand placed in the SCN

is generally confirmed in the Order-in-Original (O-I-O) as well as Order-In-Appeal

(O-I-A). As a result of which BSNL has to file appeal in CESTAT for getting relief of

the order passed in the O-I-O / O-I-A. For this purpose the cases are placed before the

COD (committee on Disputes) for permission to pursue the appeal filed in CESTAT.

About 80 cases were received from the circles during the year 2007-08 for getting

permission of COD to pursue the appeal filed in different CESTAT.

In most of the COD cases sent to this office, it is seen that BSNL is at fault on many

points some of which are cited below:

I. Short payment of service tax

II. Non payment of service tax on time

III. Non submission of ST-3 return on time

IV. Wrong availment of Cenvat Credit without valid documents

V. Non submission of documents as and when asked for in course of

audit/hearing

VI. Hearing not attended as and when held

For the cases of below Rs.5 lakhs no permission is granted by COD to pursue the

appeal filed in the CESTAT.

In many cases (Rs.5 lakhs and above) Service tax authorities in the O-I-O made

adverse comments about the assessee due to non submission of records/documents in



17

support of discharge of service tax liabilities as well as non appearance on the date

fixed for personal hearing and confirmed the demand made in the SCN. COD declines

permission in such type of cases treating the attitude of assessee as apathetic one and

the O-I-O as express one.

Denial of permission by COD tantamounts to losing the case without any further

redressal since COD, as a policy, does not review its own decisions.

To avoid the situation discussed above Circle IFAs should monitor each SSA

periodically that:

Each and every assessee complies with the service tax rules and procedure

properly. Short payment may be avoided. Copy of instruction issued in this

regard vide letter no.1002-75/2007/Taxation/713 dated 5-10-2007 may be

referred to.

If any short payment due to BSNL fault is detected at a later date, this may be

paid up immediately. Interest, if asked for, should not be contested.

Service tax liabilities are discharged within due date. Interest on delayed

payment, if asked for by service tax authorities should not be contested and

should be paid up.

Compliance and replies with supporting documents are timely made for each

and every SCN received.

All hearings of Jt. Commissioners/Asst. commissioners may be attended by

suitable persons preferably executives

Hearing held by commissioners may be attended by AOs and above since next

stage of appeal is only CESTAT

All records as asked for in the hearing may be supplied. If it is not feasible to

supply the document within the time given, further extension of time may be

sought for in writing and extension granted (if any) should be preserved in file

for further use in appeals

Case may be defended properly. Favourable similar CESTAT /CEGAT/Court

decision may be quoted in support of cases if need be.

(BSNL HQ no.1002-80/2007/Taxation/BSNL/360 dt. 16-10-2008)

CENVAT CREDIT RULES 2004

Cenvat scheme allows credit of excise of duty paid on inputs and capital goods

and service tax paid on input service. This credit can be utilized for payment of

service tax on output services. Cenvat credit is available only if there is provision of taxable output service.



18

Input Goods for CENVAT

Duty paid on input goods used by service providers for providing output service is eligible for Cenvat credit.

Input means:-

As per rule 2(k)

(iv) all goods used for providing any output service But excludes

(A) light diesel oil, high speed diesel oil or motor spirit commonly known as petrol;

(B) any goods used for:_

a) Construction of a building or a civil structure or a part thereof; or b) laying foundation or making of structures for support of capital goods except for

the provision of any taxable service under (zn) Port service, (zzl) other ports (zzm)

Airport authority service (zzq) Commercial or Industrial construction (zzzh)

construction of complex and (zzzza) Works Contract

(D)Motor Vehicles

(E) Any goods such as food items, goods used in a guest house, residential colony,

club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and

(F) any goods which have no relationship whatsoever with the manufacture of a final

product.

Credit of duty on inputs can be taken up instantly, i.e. as soon as inputs are received.

CENVAT credit on input service

[Rule 2(l)]

‘Input Service‘ means any service

(i) used by a provider of taxable service for providing an output service; or

(ii) used by a manufacturer whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products up to the

place of removal

and includes services used in relation to modernization, renovation or repairs of a

premises of provider of output service, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting,

auditing, financing, recruitment and quality control, coaching and training, computer

networking, credit rating , share registry, security, business exhibition, legal services,

inward transportation of inputs or capital goods and outward transportation up to the place of removal

but excludes services:-

(A) specified in sub-clauses (p), (zn) Port service, (zzl) other ports (zzm) Airport authority service (zzq) Commercial or Industrial construction (zzzh) construction of

complex and (zzzza) works contract of clause (105) of section 65 of Finance Act in so

far as they are used for construction of a building or a civil structure or a part thereof

or, laying of foundation or making of structures for support of capital goods. (B) specified in sub-clauses (Motor Vehicles)

d) general insurance

o) rent a cab operator for renting out a cab



19

(zo) service by authorized service station-repair, reconditioning and restoration of

motor cars, light motor vehicles and 2 wheelers (zzzzj) supply of tangible goods without transferring right of possession and control

etc. in so far as they relate to a motor vehicles except when used for provision of

taxable services for which the credit on motor vehicle is available as capital goods:

( C ) Personal such as those provided in relation to outdoor catering, beauty treatment,

health services, cosmetic and plastic surgery, membership of a club, health and fitness

centre, life insurance, health insurance and travel benefits extended to employees on

vacation such as leave or home travel concession, when such services are used primarily for personal use or consumption of any employee

The CENVAT credit in respect of input service shall be allowed, on or after the

day on which the invoice, bill or challan referred to in Rule 9 is received. (Rule

4.7)

Proviso 1: In case of an input service where the service tax is paid on reverse charge by the recipient of the service, the CENVAT credit in respect of such input service

shall be allowed on or after the day on which payment is made of the value of input

service and the service tax or payable as indicated in invoice, bill or challan referred

in Rule 9

Proviso 2:- In case of payment of the value of input service and the service tax paid or

payable as indicated in the invoice, bill or challan (R.9) is not made within 3 months

of the date of the invoice, bill or challan , the manufacturer or service provider who has taken credit on such input service shall pay an amount equal to the CENVAT

credit availed on such input service and in case the said payment is made, the

manufacturer or O.P.S. provider shall be entitled to take the credit of the amount

equivalent to the CENVAT credit paid earlier subject to other provisions of these rules.

Proviso 3:- If any payment or part thereof made towards an input service is refunded

or a credit note is received by the manufacturer or service provider who has taken credit on such input service, he shall pay an amount equal to the CENVAT credit

availed in respect of the amount so refunded or credited.

Proviso 4:- CENVAT credit in respect of an invoice, bill or challan (Rule 9) issued before 1-4-2011, shall be allowed on or after the day on which payment is made of the

value of input service and the service tax paid or payable as indicated in invoice, bill

or challan referred to in Rule 9.

Explanation I:- The amount mentioned as above, unless specified otherwise, shall be

paid by the manufacturer of goods or the provider of output service by debiting the

CENVAT credit or otherwise on or before the 5th day of the following month except

for the month of March, when it shall be made on or before 31st day of March.

Explanation II:- If the manufacturer of goods or the provider of output service fails to

pay the amount payable so it shall be recovered in the manner as provided in Rule 14

for recovery of CENVAT credit wrongly taken.



20

Input service distributor Service provider may have various place of business like Head office/Regional office

at different place/s. The services may be received at head office/regional office, but

ultimately, these will be indirectly used for providing output service. Provision has

been made to avail cenvat credit of services received and paid for at head office/regional office. Such head office/regional office will be registered with Central

Excise as „Input Service distributor‟ and it will have to issue invoice on the service

provider. They have to apply for registration in form ST-1. As per rule 9(1)(g),

invoice, bill or challan issued by an input service distributor under rule 4A of service tax credit rules is an eligible document for purpose of taking cenvat credit. The input

service distributor should issue an invoice, bill or challan on monthly basis after

consolidating the service tax paid on services received during the month.

Requirement of invoice, bill or challan: (rule 4A(2) of service tax rules)

It shall be signed by authorized person

The document should be for each recipient of the credit distributed

Document should be serially numbered The invoice should contain following details:

(i) Name, address and registration number of the person providing input

services and Serial number and date of invoice, bill or challan issued by

service provider under rule 4A(1) (ii) Name and address of input service distributor

(iii) Name and address of the recipient of the credit distributed

(iv) Amount of credit distributed

Responsibilities of Input Service Distributor

(a) Take reasonable steps to satisfy himself about identity and address of

provider of input service [rule 9(3)]

(b) Submit half yearly return within one month from close of the half year, in prescribed form ST –3 [rule 9(10)]

Often invoices and bills in respect of inputs and capital goods are received at the head

office while service is provided from some other place or site. In such case, the head office can distribute the credit of duty paid on such inputs and capital goods to the

service provider by issuing an invoice. Such office will have to be registered with

Central Excise and submit returns (quarterly) etc. similar to first stage dealer and

second stage dealer (Rule 7A of Cenvat Credit Rules, inserted w.e.f. 1-4-2008)

Condition for Availing CENVAT on Capital Goods

Duty paying documents eligible for CENVAT .

Depreciation under section 32 of income tax act not to be claimed on the

excise portion of capital goods- Rule 4[4] of CENVAT Rule,2004,

CENVAT Credit on capital goods has to be availed in two stages except by

SSI. 50% to be availed in first year when goods received and balance 50% in

any subsequent years. SSI unit can avail 100% CENVAT in the very first year.

W.e.f 1.4.2010 – Rule 4(2)(b) of CENVAT Credit Rules [ the word is

subsequent years not subsequent year ][ Till 10.9.2004 , the word used were



21

„in possession and use‟ but now „possession‟ is sufficient in subsequent years.

These need not be in use.

In case of additional custom duty paid u/s 3(5) of Custom Tariff Act ( Special

CVD), 100% CENVAT credit will be available in first year itself , even if

these goods are capital goods. Service providers are not eligible for this

CENVAT credit of this duty [ Second proviso to Rule 4(2)(a) of CENVAT

Credit Rules .

In case of unit availing SSI exemption, entire CENVAT credit can be availed

by them in first year itself. – Second proviso to Rule 4(2)(a) as inserted w.e.f.

1.4.2010.

Assessee can take full credit in second year if no credit has been taken in first

year.

If full credit is availed in the first year, demand can be only of interest on 50%

excess credit availed in the first year. [ Guardian Plasticote V. CCE]

If the capital goods are cleared as such in the first year, 100% CEVAT credit

shall be available. [ Proviso to rule 4(2)(a) of CENVAT Credit Rules ][ CCE

v. Ispat industries ltd.]

Rule 4 of the CENVAT Credit Rules, 2004 (“CCR”) provides the conditions for

availment of credit. Amendment rules inserted a new proviso after the second proviso

in Rule 4(1). The new proviso shall be inserted with effect from first day of

September, 2014. The proviso has been given as under:

“Provided also that the manufacturer or the provider of output service shall not take

CENVAT credit after six months of the date of issue of any of the documents specified

in sub- rule (1) of rule 9.”

CENVAT credit of duty paid on Capital goods

Only capital goods as defined in rule 2(a) of Cenvat Credit rules are eligible for Cenvat Credit

Rule 2(a)

Capital goods means:-

(A)The following goods, namely:_ (i) All goods falling under chapter 82, chapter 84, chapter 85, chapter 90,

heading no.68.02 and sub-heading no.6801.10 of the first schedule to

Excise Tariff Act.

(ii) Pollution control equipment (iii) Components, spares and accessories of the goods spefified at (i) and (ii)

above

(iv) Moulds and dies, jigs and fixtures

(v) Refractories and refractory material (vi) Tubes, pipes and fittings thereof, and

(vii) Storage Tank

(viii) Motor vechiles other than those falling under tarrif headings 8702, 8703, 8704,8711 and their chasis. But including dumpers and tippers.

used for providing output service



22

(B) motor vehicle registered in the name of provider of output service for providing

taxable service as specified in sub clauses (f) Courier (n) Tour operator (o) rent a cab (Zr) cargo handling (zzp) goods transport agency (zzt) outdoor caterer and (zzw)

pandal or shamiana contractor

© Dumpers or Tippers, registered in the name of provider of output service for providing taxable services (zzza) Site formation and clearance, excavation etc., and

(zzzy) mining of mineral, oil or gas

(D) Components, spares accessories of motor vehicles, dumpers or tippers, as the case may be, used to provide taxable services under (B) and (C) above (Notification dt. 24-

9-2010)

Tariff

Heading

Type of vehicle

8702 Motor vehicle for the transport of ten or more person, including

the driver

8703 Motor cars and other Motor vehicle principally designed for the

transport of persons (other than those specified in heading 8702)

including station wagon and racing cars.

8711 Motorcycle (including moped)and cycle fitted with an auxiliary

motor, with or without side cars.

Motor vehicle is not capital goods for BSNL.

Service provider (BSNL) is eligible to avail cenvat on equipment or appliance used in

an office, if these are used for providing output service. [rule 2A(2)]

Capital goods as defined in 2(a) of Cenvat Credit Rules, 2004

Chapter 82 Tools, implements, cutlery, spoons and forks, of base metal; parts

thereof of base metal

Chapter 84 Machinery, mechanical appliances and parts thereof

(Illustrative examples of Goods used by BSNL)

8414 Air or vacuum pumps, air or other gas compressors and fans;

ventilating or recycling hoods incorporating a fan, whether or not

fitted with filters

8414 51 10 Table fans

8414 51 20 Ceiling fans

8414 51 30 Pedestal fans

8415 Air-conditioning machines, comprising a motor driven fan and

elements for changing the temperature and humidity, including those

machines in which the humidity cannot be separately regulated

8418 Refrigerators, freezers and other refrigerating or freezing equipment,

electric or other



23

8418 10 Combined refrigerator-freezers, fitted with separate external doors

8418 69 20 Water cooler

8424 10 00 Fire extinguishers, whether or not charged

8428 10 11 Lifts of a kind used in buildings

8470 Calculating machines and pocket-size data recording, reproducing and

displaying machines with calculating functions; accounting machines,

postage franking machines, ticket issuing machines and similar

machines, incorporating a calculating device, cash registers

8471 Automatic data processing machines and units thereof; magnetic

or optical readers, machines for transcribing data on to data

media in coded form and machines for processing such data, not

elsewhere specified or included

8471 30 10 Personal computer

8471 41 10 Micro computer

8471 41 20 Large or main frame computer

8471 60 21 Line printer

8471 60 22 Dot matrix printer

8471 60 26 Laser jet printer

8471 60 27 Ink jet printer

8471 60 30 Monitor

8471 60 40 Keyboard

8471 60 50 Scanners

8471 60 60 Mouse

8471 70 10 Floppy disc drives

8471 70 20 Hard disc drives

8471 70 40 Magnetic tape drives

8471 70 50 Catridge tape drive

8471 70 60 CD ROM drive

8472 Other office machines (for example, hectograph or stencil duplicating

machines, addressing machines, automatic bank note dispensers, coin

sorting machines, coin counting or wrapping machines, pencil

sharpening machines, perforating or stapling machines)

Chapter 85 Electrical/Electronics machinery and Equipment


8501 Electric motors and generators (excluding generating sets)

8502 Electric generating sets and rotary converters

8504 Electrical transformers, static converters (for example, rectifiers) and

inductors



24

8509 Electro-mechanical domestic appliances, with self-contained electric

motor

8509 10 00 Vacuum cleaners, including dry and wet vacuum cleaners

8513 Portable electric lamps designed to function by their own source of

energy (for example, dry batteries, accumulators, magnetos, other than

lighting equipment of heading 8512)

8516 Electric instantaneous or storage water heaters and immersion heaters,

hand dryers

8517 Electrical apparatus for line telephony or line telegraphy,

including line telephone sets with cordless handsets and

telecommunication apparatus for carrier-current line systems or

for digital lines systems; videophones

8517 11 Line telephone sets with cordless handsets

8517 11 10 Push button type

8517 11 90 Other

8517 19 Other

8517 19 11 Push button type

8517 19 20 Videophones

8517 50 Other apparatus, for carrier-current line systems or for digital

line systems

8517 50 10 PLCC equipment

8517 50 20 VFT

8517 50 30 Modems

8517 50 40 HDSL

8517 50 50 DLC

8517 50 60 SDH

8517 50 70 Multiplexer, statistical multiplexer

8517 50 91 ISDN Terminals

8517 50 92 ISDN terminal adapters

8517 50 93 Routers

8517 80 Other apparatus

8517 80 10 Attachments for telephones

8517 80 20 Subscriber end equipment

8517 80 30 Set top boxes for gaining access to the internet

8518 Microphones and stands therefore, loudspeakers, whether or not

mounted in their enclosures, headphones and earphones, whether or

not combined with a microphones, and sets consisting of a micro-

phone and one or more loud speakers, audio-frequency electric

amplifiers; electric sound amplifier set



25

8519 Turntables(record-decks), record-players, cassette-players and other

sound reproducing apparatus, not incorporating a sound recording

device

8520 Magnetic tape recorders and other sound recording apparatus, whether

or not incorporating a sound reproducing device

8521 Video recording or reproducing apparatus whether or not

incorporating a video tuner

8523 Prepared unrecorded media for sound recording or similar recording

of other phenomena, other than products of chapter 37

8524 Records, tapes and other recorded media for sound or other similarly

recorded phenomena, including matrices and masters for the

production of records, but excluding products of chapter 37

8525 Transmission apparatus for radio-telephony, radio-telegraphy,

radio-broadcasting or television, whether or not incorporating

reception apparatus or sound recording or reproducing

apparatus; television cameras; still image video cameras and

other video camera recorders; digital cameras

8526 Radar apparatus, radio navigational aid apparatus and radio remote

control apparatus

8527 Reception apparatus for radio-telephony, radio-telegraphy or

radio-broadcasting, whether or not combined, in the same

housing, with sound recording or reproducing apparatus or a

clock

8528 Reception apparatus for television, whether or not incorporating radio-

broadcast receivers or sound or video recording or reproducing

apparatus; video monitors and video projectors

8529 Parts suitable for use solely or principally with the apparatus of

headings 8525 to 8528

8529 10 Aerials and aerial reflectors of all kinds; parts suitable for use

therewith:

(dish antenna, other aerials or antenna)

8535 Electrical apparatus for switching or protecting electrical circuits or

for making connection to or in electrical circuits for voltage exceeding

1000 volts

8536 Electrical apparatus for switching or protecting electrical circuits or

for making connection to or in electrical circuits for voltage exceeding

1000 volts

8537 Boards, panels, consoles, desks, cabinets and other bases, equipped

with two or more apparatus of heading 8535 or 8536, for electric

control or the distribution of electricity, including those incorporating



26

instruments of apparatus of chapter 90, and numerical control

apparatus, other then switching apparatus of heading 8517

8539 Electric filament or discharge lamps, including sealed beam lamp

units and ultra-violet or infrared lamps; arc-lamps

8542 Electronic integrated circuits and micro-assemblies

8542 01 10 SIM cards

8543 Electrical machines and apparatus having individual functions, not

specified or included elsewhere in this chapter

8543 89 91 RF (radio frequency) power amplifiers and noise generators for

communication jamming equipment, static or mobile or man portable

8544 Insulated( including enameled or anodized) wire, cable (including

co-axial cable) and other insulated electric conductors, whether or

not fitted with connectors; optical fibre cables, made up of

individually sheathed fibres, whether or not assembled with

electric conductors or fitted with connectors

8544 20 Co-axial cable

8544 51 20 Plastic insulated, of a kind used for telecommunication

8544 51 40 Rubber insulated of a kind used for telecommunication

8546 Electrical insulators of any material

Chapter 90 Optical, Photographic and surgical instruments


9001 10 00 Optical fibres, optical fibres bundles and cables

9008 Image projectors, other than cinematographic; photographic (other

than cinematographic) enlargers and reducers

9009 Photocopying apparatus incorporating an optical system or of the

contact type and thermo-copying apparatus

9013 Liquid crystal devices not constituting articles provided for more

specifically in other headings; lasers, other than laser diodes; other

optical appliances and instruments, not specified or included else

where in this chapter

9023 Instruments, apparatus and models, designed for demonstrational

purposes (for example, in education or exhibitions), unsuitable for

other uses

Capital goods should be used for providing output service. Duration is not specified.

Hence, if the capital goods are used for one day, Cenvat eligibility of capital goods is established, as they are used.[rule 2(b)(a)]

Capital goods used exclusively for providing exempt service are not eligible for

Cenvat credit. [rule 6(4)]. Thus partial use of capital goods for provision of exempt



27

services is permissible. i.e. in such case, Cenvat credit on capital goods will be

allowed.

Depreciation under section 32 of Income-tax Act should not

be claimed on the excise portion of the Capital goods [Rule

4(4)]

Cenvat credit on capital goods is required to be availed in

more than one year, viz. up to 50% credit can be availed

when these are received and balance in any subsequent financial year.

As per rule 3(1), Cenvat credit of capital goods can be taken of duty paid on capital

goods received in the premises of provider of output service. The rules do not require its installation or commissioning for taking credit.

Rule 4(2)(a) of Cenvat Credit Rules provides that in respect of capital goods, Cenvat

credit shall be taken only for an amount not exceeding 50% of duty. As per rule

4(2)(b), balance may be taken in any subsequent financial year. Thus, it is not that any credit must be taken in the first year. Assessee can choose to take credit in any

subsequent year, even if he taken Nil credit in the first year, he satisfies the

requirement of rule 4(2)(a), as obviously „Nil‟ does not exceed 50%.

UTILISATION OF CENVAT CREDIT

Rule 3(1) states that following duties/taxes will be available as Cenvat Credit

Basic Excise duty on indigenous inputs [paid on goods specified in First Schedule to CETA]. Corresponding CVD

on imported goods is allowable.

Education cess on manufactured excisable goods and CVD equal to education cess on imported goods. This credit can be

utilized only for payment of education cess on output

services.

Service tax on input services paid u/s 66 of Finance Act.

Education cess paid on service tax. This credit can be utilized

only for payment of education cess on output services.

Credit can be taken as soon as goods are received in the premises of service

provider. [rule 4(1)]. Service Provider should take credit at the earliest opportunity.

Service provider should maintain record of Cenvat credit availed and of credit utilized.

First proviso to Cenvat Credit rule3(4) states that only Cenvat credit available

as on last day of the month can be utilized for payment of duty even if duty is payable

by 5th of following month. Thus, Cenvat credit in respect of inputs/capital goods/input services received after end of month cannot be utilized while paying duty on 5th . the

credit can be utilized in subsequent month only.

Note: It is suggested to utilize the CENVAT credit on input services first and to

exaust the balance available against the cenvat credit on input services. Then only to go for utilization of CENVAT credit against the inputs / capital goods is preferred as

we can carry forward the unutilized part of the CENVAT credit against capital goods.



28

DUTY PAYING DOCUMETS FOR CENVAT

Rule 9(1) of Cenvat Credit Rules prescribes that Cenvat Credit can be taken on the

basis of: *Invoice of manufacture from factory

*Invoice of manufacturer from his depot or premises of consignment agent

*Invoice issued by registered importer

*Invoice issued by importer from his premises or consignment agent registered with Central Excise

*Invoice issued by registered first stage or second stage dealer

*Supplementary Invoice

*Bill of entry *Certificate issued by an appraiser of customs in respect of goods imported through

foreign post office

*a challan evidencing payment of service tax, where service tax is payable by other

than input service provider *Invoice, bill or challan issued by provider of input service on or after 10-9-2004

*Invoice, bill or challan issued by Input service distributor under rule 4A of Service

Tax Rules

As per rule 9(2) of Cenvat Credit rules,

No CENVAT credit under sub rule (1) shall be taken unless all particulars as

prescribed under the C.E. rules, 2002 or the Service Tax Rules, 1994, as the case may

are contain4ed in the said document. Proviso:

If the said document does not contain all the particulars, but contains the details of

duty or service tax payable, description of the goods or taxable service, assessable

value, Central Excise or Service Tax registration number of the person issuing the invoice, as the case may be, Name and address of the factory or warehouse or

premises of the I or II stage dealers, or provider of taxable service and the Deputy or

the Assistant Commissioner of Central Excise is satisfied that the goods or services

covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT Credit

Dealer’s Invoice for CENVAT

When the inputs are purchased directly from factory of original manufacturer,

there is proof regarding amount of duty paid, in the form of Invoice of manufacturer. If goods are imported directly by manufacturer (who is user of inputs), Bill of Entry is

proof of payment of CVD.

All dealers/depots/consignment agents issuing invoice for Cenvat purposes

will have to register with central excise authorities under rule 9 of CE Rules. Only first stage and second stage dealers are allowed to issue Invoices. Cenvatable Depots,

consignment agents and importers should be registered with CE. Invoice of

depot/consignment agent of manufacturer is eligible for Cenvat under rule

9(1)(a)(i)(I). Invoice of depot/consignment agent of importer is eligible document for cenvat as per rule 9(1)(a)(iii).

Invoice raised by manufacturer of inputs will contain details of excise duty

paid on total quantity. The wholesaler or distributor may supply the goods received

from manufacturer to more than one buyer, dealers or sub-dealers. Amount of duty



29

actually paid on goods should be indicated in the invoice of dealer on prorata basis. (It

should not be charged but merely indicated) The invoice raised by the first stage dealer / second stage dealer must contain

the description “ FIRST / SECOND STAGE DEALER “ as the case may be.

Full Cenvat credit of duty paid available even if seller gave trade discount or

price reduction later

Sometimes, manufacturer-seller agrees to give some discount to buyer after clearance

of goods. In such cases, there is no reduction in excise duty which he has already paid.

In such case, the buyer is eligible to avail Cenvat Credit of entire duty paid by manufacturer –seller, if the supplier does not claim refund of excise duty paid, since

the Cenvat credit is of duty „paid‟ and not duty „payable‟

(CBE&C no.877/15/2008-CX dated 17-11-2008)

Rule 4 of the CENVAT Credit Rules, 2004 (“CCR”) provides the conditions for

availment of credit. Amendment rules inserted a new proviso after the second proviso

in Rule 4(1). The new proviso shall be inserted with effect from first day of

September, 2014. The proviso has been given as under:

“Provided also that the manufacturer or the provider of output service shall not take

CENVAT credit after six months of the date of issue of any of the documents specified

in sub- rule (1) of rule 9.”

Exempted Output Services

Capital goods used exclusively for providing exempt service are not

eligible for Cenvat Credit [rule 6(4)]. If capital goods are partly used for taxable

services, Cenvat credit will be available.

Duty paid on Inputs and service tax paid on input services used for exempted services

cannot be used for payment of tax on services which are not exempt from tax [rule

6(1)]. If service provider uses common inputs both for exempted as well as un-exempted services, he should maintain separate records for inputs/input services used

for exempted services and should not avail cenvat on such inputs/input services.

Rule 6 (3)

Service provider of taxable service as well as exempted services,

If no separate records are maintained for taxable services & exempted services

in respect of Service Tax paid on Input Service & Excise Duty paid on Inputs

(One of the following options can be followed and full Cenvat credit can be

availed on Service Tax paid on Input Service & Excise Duty paid on Inputs) While exercising the option (for the financial year), the provider of output service

shall intimate in writing to the Superintendent of Central Excise giving the following

particulars:-

(i)Name, address and registration No. of the provider of output service; (ii)date from which the option under this clause is exercised or proposed to be

exercised;

(iii)description of taxable services

(iv)description of exempted services



30

(v)CENVAT credit of inputs and input services lying in balance as on the date of

exercising the option under this condition;

Option I:- Pay an amount equal to 5% of value of the exempted services

Option II:-

Pay an amount equivalent to CENVAT credit attributable to inputs and input services

used for provision of exempted services as follows (provisional every month)

Provisional (Every month)

Inputs

Total value of exempted service Cenvat credit taken on Inputs provided during the preceding financial year X during the month

Total value of taxable service + total value of

exempted service provided during the preceding

financial year

Provisional (Every month)

Input Service

Total value of exempted service Cenvat credit taken on Input

Service

provided during the preceding financial year X during the month


exempted service provided during the preceding

financial year

FINAL (Yearly)

Inputs

Total value of exempted service Cenvat credit taken on Inputs

provided during the financial year X during the financial year

Total value of taxable service + total value of exempted service provided during the

financial year

FINAL (Yearly)

Input Service

Total value of exempted service Cenvat credit taken on Input

Service

provided during the financial year X during the financial year




31

exempted service provided during the

financial year

Difference between the final amount determined and provisional amount paid during

the year shall be paid on or before 30th June of the succeeding financial year, where

the final amount is more than the amount paid provisionally. (Interest 24% per annum,

If short paid amount is not paid on or before 30th June as stated above)

Where the final amount determined is less than the amount paid provisionally during

the year, excess amount can be adjusted, by taking credit of such amount.

The above payment/adjustment shall be intimated to the Jurisdictional superintendent

of central Excise within a period of fifteen days from the date of adjustment/payment.

No CENVAT credit is allowed on inputs and input services used exclusively for provision of exempted services.

BSNL Instructions

Amendment in Cenvat Credit Rules 2004 w.e.f. 1-4-2008

Rule 6(3) of Cenvat Credit Rules 2004 has now been replaced by the new rule vide

notification no.10/2008-Central Excise(N.T.) dated 1-3-2008 permitting an assessee to

follow either of the following option where a Service provider is providing taxable and exempted services both but not maintaining separate accounts. This has been

made applicable with effect from 1st April 2008

OPTION IN CASE OF NON MAINTENANCE OF RECORDS

Rule 6(3) provides that in case the manufacturer of goods or the provider of output service is not opting to maintain separate accounts for dutiable goods and exempted

goods/taxable and exempted services, the manufacturer of goods or the provider of output service shall follow of the following options as applicable to him:

i) manufacturer of goods:

* to pay an amount equal to 10 % of the value of the exempted goods; or

* to pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to the manufacture of exempted goods;

ii) provider of output service:

* to pay an amount equal to 8% of the value of the exempted services; or

* to pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation for provision of exempted services.

It is understood that BSNL does not have much of Cenvat credit related to inputs.

Regarding input services in most of the SSAs the ratio of E/F [(i) „E‟ denotes total

value of exempted services provided during preceding financial year & (ii) „F‟

http://www.taxmanagementindia.com/visitor/detail_act.asp?ID=244



32

denotes total value of taxable and exempted services provided during preceding

financial year as mentioned in Rule 6(3A) (b) (iii) of the said notification] is less than 1% and also seen that Cenvat credit availed on account of input services constitutes

18% of the total Cenvat credit availed during the financial year. Hence in majority of

the case option (2) mentioned above is beneficial for BSNL.

Hence you may adopt option (2) mentioned in amended Rule 6(3) of Cenvat Credit

Rules 2004 and the same should be implemented w.e.f. 1-4-2008.

If any SSA feels, option (1) is more beneficial then the same may be followed by that SSA.

The notification may kindly be gone through and other provision /modification made

thereon may also be followed. This may be treated as most urgent

(Source:- BSNL HQ No.700-04/2005/Taxation/BSNL/Vol.II/KW/52 dt. 24-3-

2008)

Sub: Amount payable as per CENVAT Credit (Amendment) Rules, 2008 –

Notification No. 10/2008 – Central Excise (N.T) dt. 01.03.2008 issued by the

Ministry of Finance, Department of Revenue, Govt. of India.

Ref: Letter No. 700-04/2005/Taxation/BSNL/Vol. II/KW/152 dt. 24.03.2008 issued by

Taxation Branch of Corporate Office, BSNL

1. As per Sub Rule 3 of CENVAT Credit (Amendment) Rules, 2008 the provider of

output service who is providing exempted as well as taxable service and opting not to maintain separate accounts, shall follow either of the following options:

(i) the provider of output service shall pay an amount equal to eight per cent of the

value of the exempted services

(ii) the provider of output service shall pay an amount equivalent to CENVAT credit attributable to inputs and input services used in or in relation to provision of

exempted services subject to the conditions and procedure specified in sub-rule

3A

2. In the order under reference issued by the Taxation Branch of Corporate Office it

has been stated that the Circle may adopt option mentioned at Clause (ii) of Sub Rule

3 of

CENVAT Credit (Amendment) Rules, 2008 or if any SSA feels the option mentioned at Clause (i) of Sub Rule 3 is more beneficial then the said SSA may adopt the option

noted at Clause (i) of Sub Rule 3.

3. The following Accounting procedure is to be followed to account for amount to be paid by the units of BSNL to the Service Tax Authority by adopting either of the

options as mentioned in the letter under reference as per CENVAT Credit

(Amendment) Rules, 2008



33

3.1 Since the credit for the amount to be paid as per CENVAT Credit (Amendment)

Rules, 2008 cannot be availed of; the amount to be paid shall be recognized as expense of BSNL.

3.2 The following new accodes are allotted under Basic and CMTS Segments to

account for the payment: 1715501 – „Amount paid/payable as per CENVAT Credit (Amendment) Rules 2008‟

4715601 – „Amount paid/payable as per CENVAT Credit (Amendment) Rules 2008‟

1192311 – „Amount payable as per CENVAT Credit (Amendment) Rules 2008‟

4192311 – „Amount payable as per CENVAT Credit (Amendment) Rules 2008‟

3.3 The Circle / SSA / Unit which has adopted the option mentioned in Clause (i) of

Sub Rule 3 of CENVAT Credit (Amendment) Rules 2008 shall create the liability for

the amount to be paid by debiting the expense accode 1715501 / 4715601 – „Amount paid/payable as per CENVAT Credit (Amendment) Rules 2008‟ and crediting the

corresponding liability accodes 1192311 / 4192311 – Amount payable as per

CENVAT Credit (Amendment) Rules 2008‟. While making payment to the Service

Tax Authority the liability accode 1192311 / 4192311 shall be debited.

3.4 The Circle / SSA / Unit which has adopted the option mentioned in Clause (ii) of

Sub Rule 3 of CENVAT Credit (Amendment) Rules 2008 shall follow the under

mentioned procedure:

3.4.1 To create the liability for the amount to be paid every month provisionally as per

Clause (b) of Sub Rule (3A) of CENVAT Credit (Amendment) Rules 2008 the

expense accode 1715501 / 4715601 – „Amount paid/payable as per CENVAT Credit (Amendment) Rules 2008‟ shall be debited and corresponding liability accodes

1192311 / 4192311 – Amount payable as per CENVAT Credit (Amendment) Rules

2008‟ shall be credited. While making payment to the Service Tax Authority the

liability accode 1192311 / 4192311 shall be debited.

3.4.2 The Circles / SSA / Unit adopting the option mentioned in Clause (ii) of Sub

Rule 3 of CENVAT Credit (Amendment) Rules, 2008 shall determine finally the amount of CENVAT credit attributable to exempted service for the whole financial

year as per Clause (c) of Sub Rule (3A) of CENVAT Credit (Amendment) Rules

2008. The aggregate amount so determined finally for whole financial year as per

Clause (c) of Sub Rule (3A) shall be compared with the aggregate amount determined and paid provisionally as per Clause (b) of Sub Rule (3A)

3.4.3 Where the amount finally determined as per Clause (c) of Sub Rule (3A) is more

than the aggregate amount already paid provisionally on monthly basis, the liability for the amount short paid shall be created by debiting the 1715501 / 4715601 –

„Amount paid/payable as per CENVAT Credit (Amendment) Rules 2008‟ and

crediting the corresponding accodes 1192311 & 4192311 – Amount payable as per

CENVAT Credit (Amendment) Rules 2008‟ and payment shall be made within due date as per Clause (d) of Sub Rule (3A).

3.4.4 Where the amount finally determined as per Clause (c) of Sub Rule (3A) is less

than the aggregate amount already paid provisionally on monthly basis, such excess



34

payment shall be adjusted by taking credit as per Clause (f) of Sub Rule (3A). While

taking the credit through adjustment the accode 1715501 / 4715601 – „Amount paid / payable as per CENVAT Credit (Amendment) Rules 2008‟ shall be credited and

liability accode of Service Tax through which adjustment is effected, shall be debited.

3.4.5 If the liability for short-payment is created and paid in immediately next financial year such short payment should not be classified as „prior period items‟, but

recognized as expense of the next financial year. Similarly the adjustment of excess

payment shall not be treated as „prior period items‟.

(BSNL HQ No. 500-31/2006-07/CA I/BSNL/Vol. III Dated 13th November 2008)

Removal of input, capital goods and waste

The inputs or capital goods can be removed as such from the premises of service

provider on payment of an amount equal to Cenvat credit availed when the credit was

taken. In other words, it amounts to reversal of Cenvat credit taken [Rule 3(5)]

*If capital goods on which Cenvat is availed are cleared as such‟ (i.e. without use), an

„amount‟ equal to Cenvat credit availed is required to be paid.

*If capital goods are sold as scrap, an „amount‟ equal to duty payable on scrap value of capital goods is payable.

Proviso 2(b) to Rule 3(5) provides, if the capital goods, on which CENVAT credit

has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT credit taken on the said capital

goods ( other than computers and computer peripherals) reduced by 2.5% for each

quarter of a year or part thereof from the date of taking the Cenvat Credit

Proviso 2 (a) to Rule 3(5) provides that in case of computer and computer peripherals,

the rate of reduction shall be as follows, w.e.f. 27-2-2010

(a) 10% for each quarter in first year

(b) 8% for each quarter in second year (c) 5% for each quarter in third year

(d) 1% for each quarter in fourth and fifth year

Rule 3(5)(B) Write off and treatment thereof If the value of any (i) input or (ii) capital goods before being put to use, on which

CENVAT credit has been taken is written of fully or partially or where any provision

to write off fully or partially has been made in the books of account, then the

manufacturer/service provider shall pay an amount equivalent to the CENVAT Credit taken in respect of the said input/capital goods (1-3-2011)

Proviso:- If they are used subsequently in the manufacture of final products or the

provision of taxable services, he is entitled to take the credit of the CENVAT credit amount paid earlier subject to the provisions of the CENVAT Credit Rules



35

Miscellaneous provisions of Cenvat

Record of inputs and capital goods

The provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the inputs and capital goods. The record should contain

relevant information regarding (a) value (b) duty paid (c) Cenvat credit taken and

utilized (d) The person from whom inputs/capital goods have been procured. Burden

of proof regarding admissibility of Cenvat credit is on the provider of output service taking the credit –Rule 9(5)

Record of input services

The provider of output service shall maintain proper records for receipt and

consumption of the input services. The record should contain relevant information

regarding-(a) Value of service (b)Tax paid (c) Cenvat Credit taken and utilized (d) Person from whom input service has been procured. The burden of proof regarding

the admissibility of Cenvat credit shall lie upon the person taking such credit [rule

9(6)]

Cenvat credit record

It is current account of Cenvat credit received, credit utilized and credit balance. This should give details of (a) credit availed against each input/capital goods (b) credit

utilised (c) Balance credit available

Returns

A first stage or second stage dealer shall file a quarterly return to the Superintendent

of Central Excise within 15 days from the close of each quarter of a year, in the prescribed form

*Half yearly return before 25th day of the following month from the close of half year,

by provider of output services [rule 9(9)] Return should be in form ST-3. *Half yearly return before 25th day of the following month from the close of half

year, by Input Service Distributor [rule 9(10)] Return should be in form ST-3.

The provider of output service, availing CENVAT credit and the input service distributor may submit a revised return to correct a mistake or omission within a

period of 60 days from the date of submission of the return

BSNL Instructions

1.The CENVAT Credit will be availed by all the revenue earning SSAs/Units which are already having service tax registration Number

2.The offices/units which are generally not earning revenue and not having Service

Tax registration number such as Corporate office, Circle Offices. Telecom Stores,

Telecom Factories, Projects/REP/Task Force, Maintenance Region, Civil/Electrical, Data Network, NCES, QA, T&D Circle, Training Centres, CPAO (ITI Bills) etc. will

avail the credit of CENVAT [Service tax paid on input services & Central excise duty

paid on eligible Capital goods/Inputs] through the revenue earning

SSAs/Units/Offices situated at the same area which are nominated as “Nodal Offices” for the purpose.



36

3.The following offices will be nodal offices for availing Cenvat credit for Service tax

paid on input services & Central excise duty paid on eligible Capital goods/Inputs by non-revenue earning units

Non-revenue earning units who will avail Cenvat credit for

Service tax paid on input services & Central excise duty paid on

eligible Capital goods/Inputs through Nodal office

Nodal office

Corporate office, Units of Data Network, NCES, NTP, QA,

Telecom Stores any other non-revenue earning units situated at

Delhi

NTR New Delhi

Units/Circle offices of STP, STR, QA, Telecom Stores, NCES, T&D any other non-revenue earning units situated at Chennai

Chennai Telephones

Units/Circle offices of ETP,ETR, QA, NCES, Telecom Stores,

Telecom Factory, T&D, any other non revenue earning units

located at Kolkata

Kolkata Telephones

Units/Circle offices of WTP, WTR, QA, NCES, telecom Stores,

Telecom Factory, T&D, any other non-revenue earning units

located at Mumbai

Circle office of

Maharashtra Circle

Units of Project Circles/REP/Task Force, Maintenance Region,

Data Network, T&D circle, QA circle, CPAO (ITI Bills),

Training Centres, NATFM, Civil & Electrical Wing situated at

places other than at Mumbai, Chennai, New Delhi & Kolkata

SSAs situated in the

Area where the above

mentioned offices are

located

The PAUs/Divisions of four Project Circles, Task Force Circle, Gauwahati

will avail the Cenvat credit (in respect of ‘eligible capital goods’/Inputs,

Input Services) through the revenue earning SSA/ Metro Circle co-

located at the same place. For example GM Project, Lucknow under NTP

will avail the Cenvat credit through Lucknow SSA under UP (E) Circle.

All the units, who will be availing CENVAT credit directly or through Nodal

office, are required to maintain a Register to keep the following information about

service tax paid on input service, Central Excise duty paid on eligible goods/

Inputs as well as the credit availed. i. Sl. No. and date of document on which CENVAT credit is

availed.

ii. Service Tax registration number, name and address of the input

service provider iii. Description and value of input service & Service tax paid

iv. Central Excise registration number of Ist stage Dealer/IInd

stage Dealer/Manufacturer/Importer

v. Description and value of eligible capital goods/Inputs & Central Excise duty paid

vi. CENVAT credit availed

vii. CENVAT credit utilized for payment of service tax on output

service.



37

The nodal office will keep a separate Register to record the above information in

respect of offices/units which will be availing CENVAT credit through the former. The information must be compiled on monthly basis.

Accounting Entries

On receipt of goods (capital goods/Inputs), the following JS is to be passed:-

For Value of goods (excluding the excise

duty & Education cess, Sec. & Higher

Education Cess on Excise duty)

Dr. Concerned final head under

sch.105/114/117/171 to 185

For Excise duty on the above goods Dr.1131503 Excise duty paid on eligible

goods (or)

Dr.1131507 Excise Duty & other

levies(other the Education cess) on Inputs

For Education Cess on Excise duty Dr. 1131504 Education Cess on Excise

duty paid on eligible goods (or)

Dr. 1131508 Education cess on Inputs

For Secondary & Higher Education Cess of

Excise Duty

Dr. 1131511 (or)

Dr. 1131509

For gross value of goods Cr. Sy. Creditors (1190101etc.)

For payment of Service Tax & Education cess on Input Service ( Security

Guards, Auditors etc.) by BSNL,

Dr. Concerned final head under Administrative expenses Sch.171 to 185, 192 (total

amount excluding Service Tax & Education cess ,Sec. & High Education Cess)

Dr. 1131505 Service Tax paid on Input service

Dr. 1131506 Education cess on service tax paid on Input service

Dr. 1131512 Sec. & Higher Edu. Cess on Service tax paid on Input service

Cr. Sy creditors (say 1190102 etc.) (Gross amount)

When the above excise duty on eligible goods / Inputs & service tax paid on Input

service, adjusted against service collected on output service, JS will be:-

Dr.1192301 Service Tax Payable

Cr.1131503 Excise duty paid on eligible goods

Cr.1131507 Excise Duty & other levies (other the Education cess) on Inputs

Cr.1131505 Service Tax paid on Input service

When the above education cess on excise duty on eligible goods / Inputs & Education

Cess on service tax paid on Input service, adjusted against service collected on output

service, JS will be:-

Dr. 1192306 Education Cess payable

Cr. 1131504 Education Cess on Excise duty paid on eligible goods (or)

Cr. 1131508 Education Cess on Inputs



38

Cr. 1131506 Education Cess on service tax paid on Input service

When the above sec. & Higher education cess on excise duty on eligible goods /

Inputs & on service tax paid on Input service, adjusted against service collected on

output service, JS will be:-

Dr. 1192309 Secondary & Higher Education Cess payable

Cr. 1131511 Secondary & Higher Education Cess on Excise duty paid on eligible

goods

Cr. 1131509 Secondary & Higher Education Cess on Inputs

Cr. 1131512 Secondary & Higher Education Cess on service tax paid on Input service

( Note: ACCOUNTING AS PER POT RULES TO BE OBERVED –

CIRCULAR 264 )

After making adjustment as mentioned above the units/offices/nodal office will pay the balance amount (net credit balance) under head „service tax payable‟

under 119/419 schedule by debiting the above head [i.e. entering the payment

details in payment side of Operation Bank Book]

1. After making payment, the unit/offices/nodal office will update the Registers

mentioned above. The nodal offices will intimate through registered post the

particulars of CENVAT CREDIT availed of to the respective offices on behalf

of which it has availed the credit during the month. 2. The office/units on receipt of information from the Nodal office will update

their register.

3. For the month of March the offices/units which avail credit through Nodal

offices will ensure that ATDs along with vouchers are sent to the Nodal office immediately so that the latter will take the same in their accounts of March.

4. The units who are collecting service tax on output service shall take action to

print the service tax registration number on the forms used as telephone

bills/demand notes/invoice/challan etc. Where manual demand notes/bills/invoices etc. are issued action may action to indicate the service tax

registration number with the help of rubber stamp. Similarly the Permanent

Account Number (PAN) of BSNL-AABCB5576C shall also be got printed in

all the Bills/Challans/demand notes issued by BSNL.

Source:-BSNL HQ No.700-46/2003-CA-III/BSNL/KW dt. 19-1-2004 & No. 700-

46/2003/CA-III/BSNL/Vol.-II Dt- 11th March 2005)

Proper availment of CENVAT credit and registration as Input service

Distributor-Reg

Many circles have reported that the Service Tax authorities are not permitting

the availment of CENVAT credits in respect of the non-revenue earning circles and

units like CIVIL/Electrical wing/ Store Depots, Administrative Office etc. and also

insisting for the reversal of the credits availed earlier.

Further it is intimated that for availing the credit pertaining to such office, the

non-revenue earning units are required to get themselves registered as Input service



39

distributor called first stage dealer under the Service Tax Laws/CENVAT Credit

Rules. On getting the registration the non-revenue earning units can transfer the

CENVAT credit on the inputs / input services to the other units by issuing a valid

invoice.

In view of above requirement under the Service Tax Laws/CENVAT credit

Rules, all the non-revenue earning circles/units like project, Maintenance, Q&A, Data

Networks, Civil, Electrical, Store Depots, Administrative Office etc. may get

registered with the service tax authorities as Input Service Distributors complying

with all the requirements of registration and also covering all the taxable services

handled by them. Attention is also invited to Rule-7 and 9 of the CENVAT credit

Rules. These non-revenue earning circles/units should ensure that the names of all the

BSNL offices to whom the Invoices alongwith ATD are to be raised for availing the

credit are indicated while registering as Input Service Distributor.

Vide Notification No.31/2005-Service Tax dated 20-10-2005 Government has

introduced New Service Tax Return-in Form-ST-3. It is important to mention vide

para-2 Circular No.82/3/2005-ST dated 21-10-2005 it is clarified that Form ST-3 has

been specified for the purpose of furnishing Return under sub rules-(9) and (10) of

Rule-9 of the CENVAT credit Rules, 2004 vide Notification No.33/2005-Central

Excise(N.T.) dated 20-10-2005.

Every Service Tax paying units/Input Service Distributor are required to file an half

yearly Return in new Form ST-3 only for the half year ended on 31-3-2006 and

onwards.

The copy of the new ST-3 form may be downloaded from the following website:-

www.cbec.gov.in

Immediate action may be taken in the matter and any problems faced in getting the

Registration may be brought to the notice of this office.

(BSNL HQ No.700-04/2005/TAXATION/BSNL/Vol.II dt. 17-3-2006)

1) Many circles have reported that the Service Tax authorities are not permitting

the availment of CENVAT credit by the SSAs/Units on capital goods/inputs

received from the Circle Telecom Store Depot (CTSD) on the ground that

a) The invoice / challans received with the materials are not issued in the

name of the units availing the Cenvat Credit.

b) Such invoices/challans are the copies and not the original one and

c) ATD‟s are not prescribed document under Rule 9 of the Cenvat Credit

Rules 2004 on which cenvat credit can be availed

2) To over come this situation and to avail the Cenvat Credit pertaining to such

transfer of capital goods/ inputs the transferring units i.e. CTSDs may get

http://www.cbec.gov.in/



40

themselves registered as 1st Stage Dealer with the Central Excise/ Service Tax

authorities under the Central Excise Rules 2002/ CENVAT Credit Rules, 2004

and these CTSDs are required to issue invoice (proforma enclosed) under rule

9 of the Cenvat Credit Rule 2004 along with the materials transferred to the

SSA/units.

3) On the strength of this registration, goods/inputs can be transferred to the

SSAs/Units with an invoice/challan prepared under the Rule 9 of the Cenvat

Credit Rules 2004 which will be treated as a valid duty paid document. On the

basis of this document the recipient SSAs/Units would be able to avail Cenvat

Credit on Capital goods/inputs.

4) In case CTSDs are procuring the goods from any firm which itself is a

registered 1st stage dealer and not a manufacturer then such CTSDs would be

required to get registered as a 2nd stage Dealer also and comply with all the

procedural requirement as 2nd stage dealer.

BHARAT SANCHAR NIGAM LTD

CIRCLE TELECOM STORES DEPOT

CENVAT DEALER INVOICE

(Under Rule 9 of Central Excise Rules, 2002)

Central Excise Range/

Division Address:

Issue note No.

Dealer Invoice No.:

Date Date and time of Issue:

Date and Time of

Removal:

GRN Number and Date:

Name and address of the

consignee:

Consignee‟s Range & Division

Description of item Quantity Assessable value Tariff Part code



41

Excise @ Rs.

Education Cess @ Rs.

S & HE Cess @ Rs.

Rupees

DETAILS OF VENDOR‟ INVOICE

Name and Address of the Vendor: Invoice No.: Date

Range & Division

ECC No.

Description of

Item

Qty. Assessable

value

% of ED % of

cess

ED

value

Cess

value

Any other details: For BSNL CTSD----------------------

Prepared by: Authorised Signatory

(BSNL HQ No.700-04/2005/Taxation/BSNL/VOL-II/KW/614 dt. 25-6-2007)

Availment of CENVAT Credit on Capital goods by project circles in BSNL.

Kindly refer this office letter of even no.615 dated 25-6-2007 and also no.672

dated 6-8-2007 wherein comment/suggestions were sought for by this office whether

units of project circles can take registration as 1st /2nd Stage dealers with the Central Excise / service tax authorities for issuing the Cenvatable invoice to the transferee

(user) SSA/ Units for utilization of Cenvat Credit eligible on capital goods.

Suggestions/Comments of Projects circles have been received and deliberated and it is advised that for availing the Cenvat Credits for Excise duty paid on capital

goods by the units of Project circles, the transferring(purchasing) units may get

themselves registered as “1st stage Dealer” with Central Excise/ Service Tax

authorities under Central Excise rules 2002 and /CENVAT Credit Rules 2004 and these units are required to issue invoice (proforma enclosed) under „rule 9 of

CENVAT Credit Rules 2004 to the SSAs /Units concerned.

In case Projects circles and its units are procuring capital goods from any firm which

itself registered as a 1st stage dealer and not a manufacturer then in such cases



42

particular units of project circles would be required to get registered as 2nd stage

dealer also and comply with necessary formalities in this regard. (BSNL HQ No.700-04/2005/Taxation/BSNL/Vol.IIKW/887 dt. 14-12-2007)

It may also be ensured that Cenvatable invoices may be issued only to the concerned

Circles/SSAs/Units to which the capital goods have been transferred for use to

provide output service and not to the nodal circle fixed for availing Cenvat Credit as per earlier instructions

(BSNL HQ No.700-04/2005/Taxation/BSNL/Vol.II/KW/42 dt. 30-1-2008)

W.E.F. 1-3-2007, CENVAT credit can be taken only if all details as prescribed in

Rules are available in invoice. If even one detail as required under Rules is missing,

permission from Assistant/deputy Commissioner will be required

W.E.F. 1-4-2007, in voice must contain excise or service tax registration number of

person issuing the invoice. Otherwise, cenvat credit will not be available.

W.E.F. 1-4-2007, invoice shall also contain address of the jurisdictional Central

Excise division.

Electronic Accounting system in Central Excise & Service Tax

(Easiest) forms the core of e-payment system devised by the Office of the

Principal Chief Controller of Accounts (CBEC) Introduction:

E-payment of Central Excise and Service Tax is an additional mode of payment in addition to the conventional methods offered by the banks to their customers

It is essentially an arrangement between the customers (service tax payers) and the

bank To avail this facility, the taxpayer has to get registered with the bank authorized for

the respective commissionerate and offering e-payment solution.

The list of the Banks offering e-payment facility: (As on 24th July, 2006)

1. Union Bank of India 2. UTI Bank 3. ICICI Bank

4. HDFC Bank 5. IDBI Bank 6.State Bank of India

7. Punjab National Bank 8. Indian Overseas Bank 9.State Bank of Travancore

10.Bank of India 11. Corporation Bank 12.State Bank of

Sourashtra

13.Indian Bank 14.State Bank of Patiala 15.State Bank of Hyderabad

16.Syndicate Bank 17. State Bank of Bikaner & Jaipur 18. Vijaya Bank

19.State Bank of Indore 20.Bank of Maharashtra 21. Canara Bank 22. State Bank of Mysore 23. United Bank of India 24. Bank of Baroda

[Based on information from the office of the Principal Chief controller of Accounts,

CBEC]



43

Advantages:

*Ease of operation and convenience *Availability of the facility is on 24 x 7 basis

*On-line filling of challans and payment of taxes (No more queues and waiting)

*Instant cyber receipts for payment made

*Challans delivered at door step and *Service is normally free of charge

The work flow [procedure] of e-payment:

For taxpayers who opt to maintain account with the concerned bank and willing to use internet banking facility:

*Taxpayer logs on to the bank‟s web site.

*The bank‟s site allows the taxpayer to enter into the secure banking area after

verifying the user ID and password provided to the taxpayer by the bank; *Once in the secure baking area of the bank, the tax payer can select the “Pay Tax”

menu which will further offer option to select various taxes he can pay on-line;

*Once opted for CBEC (Indirect Tax), the taxpayer is guided to the challan form for

filling up the details; *There will be an on-line validation for Assessee code, Location Code, Account Head

against the masters provided to the bank from the concerned Pay and Accounts

Office.The validation is mandatory and only successful entrants will be allowed to

proceed further; *Banks will obtain and keep only such Assessee Codes, in their master, which

belongs to the assessee who falls under the commissionerates for which the bank is

authorized to collect indirect tax revenue. This will ensure that the bank is not

collecting and accounting indirect tax revenue for a commissionerate for which it is not authorized;

*On successful validation of the details in the challan format, the taxpayer is guided to

a „make payment screen‟ showing the payment details filled in by the taxpayer on the

challan format; *The taxpayer gets an option to “continue” or “cancel”;

*On selecting “cancel”, the taxpayer is prompt for entering his user ID and password

to enter into the bank‟s transaction module;

*This screen further leads the taxpayer to the page describing his account details with the bank;

*Taxpayer selects the account to be debited;

*Authorise the payment transaction;

*On successful payment transaction, the account of the taxpayer gets debited and taxpayer gets a unique system generated payment confirmation number;

*The concerned Focal Point Bank prints the challan and include in the scroll on a day

to day basis and forward to the concerned PAO and to the range Officer as per the

existing procedure and ensures two copies of the challan delivered to the taxpayer; *fund transaction and settlement with Government will be the exclusive responsibility

of the bank as per the existing procedure

Under-utilisation of Eligible cenvat Credit

Review of the Trial balance statement for the month of Sep‟2007 received from

circles/Units reveals that,



44

1.Full amount of cenvat credit eligible on account of service tax and cess paid on

input services/Inputs has not been availed of though service tax is being paid despite of having pending unutilized service tax amount paid on input services/Inputs.

2. Similarly it appears that cenvat credit eligible in respect of Excise duty and cess

paid on capital goods at the end of previous financial year and 50% of the same for

the current year is also not being availed of 3. The actual amount which was due to be utilized for cenvat credit up to the end of

Sep‟2007 by each circle could not be ascertained due to non submission of the

monthly cenvat credit statement which is supposed to be submitted at the time of

submission of the Trial Balance of that month 4. In many cases monthly cenvat credit statement are found to be submitted without

any reconciliation with the trial balance

5. It has been observed that service tax authorities are carrying out the service tax

audit and imposing interest and penalty due to wrong availment of cenvat credit

In view of pre page, it is requested to ensure that:

1.The instructions issued vide this office letter of even no./332 dated 11-1-2007 for

proper utilization of pending eligible cenvat credit are followed. 2.Cenvat credit eligible in respect of Excise duty paid on capital goods at the end of

previous financial year (31-3-2007) and 50% of the cenvat credit eligible in respect of

Excise duty paid on capital goods in the current financial year must be utilized by

Feb‟2008 since availing huge accumulated credit may not be permitted by the service tax authorities in march‟2008 under their pressure to achieve the revenue targets for

the year

3.Cenvat credit eligible as on 31-3-2008 must be tallied with the amount in the March

final trial balance. 4.Proper documentation is maintained for all the cenvat credit eligible and cenvat

credit utilized against the amount due on payment of service tax on output service.

5.Monthly cenvat credit statement is regularly submitted to this office after due

reconciliation with the trial balance.

Your are requested to monitor all the units under your control personally so that

maximum cenvat credit eligible is utilized and unnecessary cash outflow is avoided.

Timely and correct submission of cenvat credit statements to this office may also be ensured.

(BSNL HQ No.700-04/2005/Taxation/BSNL/Vol-II/Part/869 dt. 04/05-12-2007)

On a review of the Cenvat credit statements received from Circles/Units, for the month of Sept.2006 it is observed that,

1.Cenvat Credit eligible is not being utilized fully. Service Tax is being paid month

wise in spite of having pending unutilized service tax amount paid on input services.

2.Cenvat Credit eligible in respect of Excise duty paid on capital goods at the end of

previous financial year are not completely utilized in the current financial year also.

3.Closing balance of the previous month under Service Tax Excise duty are not brought forward as opening balance of the current month by some of the circles.

4.Balance noted in the cenvat credit statement and amount booked in the schedule 13

of the Trial Balance differ



45

5.There are also arithmetical mistakes in the statement

As service Tax Audit of BSNL offices, is being conducted by the Service Tax

Authorities, BSNL should maintain proper records of the Service Tax payments and

Cenvat Credit availment to avoid any penal action from the Department like penalty and levy of interest etc.

In view of the above, it is requested to ensure that:

1.The instructions conveyed through circular-31 issued by the Corporate Account section and also the letter of even number dated 15-11-2006 for proper utilization of

pending eligible cenvat credit are followed.

2.Cenvat credit eligible in respect of Excise duty paid on capital goods at the end of

previous financial year (31-3-2006) and 50% of the cenvat credit eligible in respect of Excise duty paid on capital goods/Inputs in the current financial year must be utilized

by Feb‟2007 since availing huge accumulated credit may not be permitted by the

service tax authorities in march‟2007 under their pressure to achieve the revenue

targets for the year 3.Cenvat credit eligible as on 31-3-2007 must be tallied with the amount in the March

final trial balance.

4.Proper documentation is maintained for all the cenvat credit eligible and cenvat

credit utilized against the amount due on payment of service tax on output service.

Your are requested to monitor all the units under your control personally so that

maximum cenvat credit eligible is utilized and unnecessary cash outflow is avoided.

Timely and correct submission of cenvat credit statements to this office may also be ensured.

(BSNL HQ No.700-04/2005/Taxation/BSNL/Vol-II/Part/332 dt. 11-1-2007)

Questions in Indirect Taxes (Service Tax)

1. What is Service Tax and what are the applicable rates from its inception?

2. What are the Services in BSNL exempted from Service Tax?

3. What are the various registrations under Service Tax

4. Indicate who are all responsible for paying Service Tax

5. Is there any provisions in Service Tax to pay Service Tax by the Service

receiver if so who are responsible?

6. What are the formalities to get registration for Service Tax?

7. Explain briefly about the payment of Service Tax?

8. What are the various penalties under service Tax rules?

9. What way Service Tax will affect the TDS?

10. What are the important information contained in the invoice of the Service

Provider?

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