Conditions To Claim Service Tax Credit-Apartment Owners Association

An apartment owners association or Housing society can claim service tax credit if the service provided and received by association falls in same category of service. The Finance Act, 2002 has amended Section 94 of the Finance Act, 1994 to provide for credit of Service. As per section 94(2)(ee) of the Finance Act, 1994, Central Government has been empowered to make rules for the credit of service tax paid on the services consumed for providing a taxable service in case where the services consumed and service provided fall in the same category of taxable service.

As per Section 65(105)(zzg), taxable service means any service provided or to be provided to any person by any person in relation to management, maintenance or repair. Maintenance or repair activities are generally carried out under a contract or an agreement and these would be covered. The contract or agreement may or may not be in written form as the definition is silent in this regard. Services provided by associations are taxed under the separate category of club or association’s services.

To claim Service Tax Credits, Apartment owners association or Residents Welfare Association or Housing Society has to meet following conditions.

Procedural Requirement for Service Tax Credit

Following is an extract from the Central Excise, Customs & Service Tax website (http://as.ori.nic.in/cenexbbsr/st_credit.htm) which states the Procedural Requirement for Service Tax Credit

• If both the input and output services fall under same category of service, credit can be availed in respect of all such input service for which invoice or bill or challan is issued on or after 16.8.2002.

• If the input and output services fall under the different categories of services, credit can be availed in respect of input services for which invoice or bill or challan is issued on or after 14.5.2003.

• The output service provider shall be allowed to take such credit only after he makes payment against the bill to the input service provider.

• If the output service provider also provides either any taxable service which is exempted from payment of service tax or any service which is not at all taxable, the input services on which service tax is paid might be used both in respect of the taxable service as well as the exempted/non-taxable service, rendered by the output service provider. In such a case the following procedure have been prescribed.

1. The output service provider shall maintain separate accounts in respect of the input service availed by him and utilized in the rendering of taxable service as well as exempted/non-taxable service. Credit can be availed only in respect of that quantum of input service, which is utilized by the service provider towards rendering taxable services.
2. If the output service provider opts not to maintain such records, he can utilize service tax credit of his service tax liability, only to the extent of 35% of service tax payable on the output service.

• Service tax credit in respect of Telephone connection can be availed only if such telephone connection is installed in the premises where output service is provided.

• In support of the credit availed, the invoice or bill or challan issued by the input service provider shall be preserved. It should contain the following information:

1. Serial number of the document,
2. Date of issue,
3. Description and value of the input service,
4. The service tax paid/payable,
5. Service tax registration number
6. Address of the input service provider.

• The output service provider shall maintain proper records with regard to the availment of service tax credit availed by him.

• A half yearly return in the proforma in terms of Rule 5(4) of the Service Tax Credit Rules, 2002 (http://as.ori.nic.in/cenexbbsr/ST%20credit.htm) has to be filed along with half yearly ST-3 return.

• The un-utilized balance of service tax cannot be claimed as refund.

No service tax on self service

It is a settled principle in law of service tax that to impose liability of service tax, there must be two parties, one service provider and the other, service receiver. When service provider and service receiver is same, it is “self service” and there is no service tax on self service.

Disclaimer: The article contains data collected from various sources and the use of same is at readers discretion.