The provisions relating to availment of Cenvat Credit are discussed below:
- Services are considered as exempt service under Cenvat Credit Rules
The definition of exempt service is provided under rule 2(e) of the Cenvat Credit Rules, 2004. It reads as follows:
(e) “exempted service” means a-
(1) taxable service which is exempt from the whole of the service tax leviable thereon; or
(2) service, on which no service tax is leviable under section 66B of the Finance Act; or
(3) taxable service whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken;
but shall not include a service which is exported in terms of rule 6A of the Service Tax Rules, 1994.
Clause (2) of the definition considers the service on which no service tax is payable under section 66B of the Finance Act as an exempt service. As mentioned above, under section 66B, no tax is leviable on the services which are specified in negative list. Hence, these services will be considered as exempt service.
- Non-availment of Cenvat Credit on provision of service which are not taxable
Rule 6(1) of the Cenvat Credit Rules, 2004 provides that the provider of output service is not entitled to take credit of duty paid on inputs or service tax paid on input services which are used in providing the exempted output services. Thus, to the extent output services are exempt from the payment of service tax, the credit of duty paid on inputs and service tax paid on the input services used therein will not be available. Hence, service provider providing this service will not be entitled to credit on input or input services used in providing such service.