We have our event management services from Delhi and we avail of various input services for this. Recently certain amendments for availment of credit have been made under the credit rules. We have been taking credit of input services on a payment basis. We wish to understand the amendment for availing credit of input services.
With effect from April 1, 2011, the Cenvat Credit Rules have been amended whereby credit on input services will now be allowed on ?receipt of invoice? by the service recipient (prior to April 1, 2011, credit of input services was available on payment for input service and service tax thereon).
However, where the payment indicated in the invoice is not made within three months from the date of the invoice, the amount of cenvat credit will not be available on such input services. Such amount would be available as credit once the said payment is made. Further, please note that cenvat credit of input services where invoices were issued prior to 1 April 2011, would continue to be allowed upon payment of value of service and service tax thereon.
Further, the Budget 2011 has amended the definition of input services wherein the scope of input services for which credit can be claimed has been tightened. Re-examination of input services for which credit can be taken would be required.
We manufacture readymade branded garments. We are not paying excise duty on the said garments because of the exemption provided on readymade garments under Notification No. 30/2004-C.E. dated 9-7-2004. However, we know that vide Budget 2011, the exemption on readymade garments has been withdrawn. Please advise.
Excise duty at the rate of 10% on readymade garments and made-up articles sold under a brand name has been mandatorily levied with effect from March 1, 2011.? ?Brand name? has been defined to mean a trade name or a mark such as a symbol, monogram, label, signature or invented words or writing used for the purpose of indicating a connection between the product and some person using such name.
Hence, manufacture of readymade garments will be liable to excise duty at 10%. Further, abatement of 55% on the maximum retail price of the garments sold under a brand name has been prescribed. It is highlighted that clearances of garments sold under a brand name up to the value of R1.5 crore will not attract excise duty provided the total clearance of the unit in the previous fiscal was less than R4 crore.
We are a Delhi-based luxury hotel. Recently service tax has been imposed on services provided for stay in a hotel. We have recently made some advance bookings and received the payment for the same. Please advise us on the applicability of service tax on the above amount.
Service tax has sought to be made applicable on short term accommodation services provided by any hotel, inn by the Finance Act, 2011. This service will be taxable where the continuous period of stay is less than three months. To give effect to this levy, a notification shall be issued specifying the effective date of the levy. (This notification is yet to be issued.)
Point of Taxation Rules, 2011 has been introduced which provides for determination of point of taxation in case service tax becoming applicable on a service. It also provides that no service tax shall be payable if the invoice is issued and payment has been received before the service becomes taxable. Hence, service tax would not be applicable if the invoice for services to be rendered has been issued and payment has been received prior to the effective date for levy of service tax on hotel accommodation.
?The replies do not constitute professional advice. Neither E&Y nor FE is liable for any action taken on the basis of these replies