Sm........ (SR. EXECUTIVE) 09 November 2009

Service Tax Credit only after payment (by book adjustment)

Dear Members,

Company "X" gets Job work done from Company "Y" and the Company "Y" (ob worker) charnges Service Tax on Job work charges. Company "X" also sells material to Company "Y". Now Company "X" has to pay to Company Y" on a/c of job work charges and on the other hand Company "X" also has to recover amount against the sales made to company "Y".
(Sale are being separate transaction)

Company X" instead of making payment to "Y" (on a/c of job work charges) adjust the amount payable towards the same agaisnt sales made to the Job worker.

WHETHER ADJUSTMENT OF SUCH NATURE WILL AMOUNT TO PAYMENT MADE AS PER SERVICE TAX RULES.

WHETHER COMPANY "X" IS ELIGIBLE TO TAKE CREDIT OF SERVICE ON THE JOBWORK CHARGES AFTER SUCH ADJUSTMENT.

PLEASE CLARIFY THE ABOVE IN THE LIGHT OF RULE 4 (7) OF CENVAT CREDIT RULES, 2004

Request - please support your reply with some departmental clarfication i.e. circular etc. or any case law in this regard.

Regards
Sameer

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1 Replies

Asha Pole (Legal) 18 November 2009

Firstly your question is quite ambiguous, since the nature of work mentioned above is a job work, Y cannot charge you service tax for its invoice, it may either charge you Works contract Tax or the least Vat depending on the type of work done. And as stated above If X sells the same product to Y, there is no service tax involved in your case, since there is no delivery of service, it's the product that you are selling but if that sale is a service like telecommunication,rooms etc , you may charge service tax otherwise you can only levy VAT on your sale.

If you further require any clarification, please specify the product that you are selling and the product on which the job work is done so that we can support your reply with some departmental clarification.