CIR. NO.77/07/2004-CX(ST), DT. 10/03/2004

Clarification on ambiguity in the provisions of Rule 3(5) of the Service Tax Credit Rules, 2002

An issue has been raised seeking clarification on the ambiguity in the provisions of Rule 3(5) of the Service Tax Credit Rules, 2002 which reads that ‘in case the service provider, opts not to maintain separate accounts of input service meant for consumption in relation to rendering of such output service which are chargeable to service tax as well as exempted services or non-taxable services, he shall be allowed to utilize service tax credit for payment of service tax on any output service only to the extent of an amount not exceeding thirty five percent of the amount of service tax payable on such output service’.

2. It is to clarify that input service tax credit can be utilized only to the extent of 35% of the total service tax payable on all the taxable output services.

3. The field formations may suitably be informed.

4. A suitable trade notice may be issued.

5. Hindi version will follow.

Yours faithfully,

(MANISH MOHAN)
Under Secretary to the Government of India

F.No. 137/04/2004-CX-4

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