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DISTRIBUTION OF CREDIT BY INPUT SERVICE DISTRIBUTOR- (PART-1)

Service Tax - By: - Dr. Sanjiv Agarwal - Dated:- 21-7-2015 - Distribution of Credit by Input Service Distributor (Rule 7) The facility of registering as an input service distributor exists to allow businesses to operate at their convenience and allow centralized procurement of services and the distribution of credit to units where such services are used. The provisions have been amended by Finance Act, 2012 to align the practice with the intent stated above. Credit of only input services can be .....

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vice used exclusively in one unit can be distributed only to that unit. If it is used in more than one unit, the credit can be distributed proportionate to the turnover of the units. The total turnover shall be determined in the same manner as determined under rule 5 and shall be determined for the month previous to the month during which the Cenvat credit is distributed. In case if any of its unit pays tax or duty on quarterly basis as provided in rule 6 of Service Tax Rules, 1994 or rule 8 of .....

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e available. In case of a new unit wherein any credit is exclusively used, the credit can be distributed in total to such unit. For example, a company manufactures fans in 2 units and other appliances in 2 other units. Advertisement services for fans would qualify as an input service for the units manufacturing fans and hence could be distributed to such units based on the turnover of the previous month of the 2 units. Credit so distributed is availed on the strength of a challan issued by the I .....

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ll be distributed pro data on the basis of the turnover to the concerned unit to the sum total of the turnover of all the units to which the service relates. For example, in case of services by way of advertisement - (i) If the advertisement is for a product or service provided from only one unit, the said credit shall be distributed only to that unit; and if two units, the said credit shall be distributed only to those two units, in proportion to the respective turnovers; (ii) If the advertisem .....

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d unit to the sum total of the turnover of all the units to which the service relates during the same period. Cenvat Credit (Third Amendment) Rules, 2014 as notified vide Notification No. 5/2014-CE (NT) dated 24.02.2014 w.e.f. 1.4.2014 has amended Rule 7 of CCR in respect of manner of distribution of credit by Input Service Distributor (ISD). The explanation defining relevant period has also been substituted. Accordingly, Service Tax credit attributable to service used by one or more units exclu .....

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