Necessity for Input Service distributor:-
In many cases (like the cases of manufacturers having different units spread over various parts of the country), it may happen that the bill/ invoice in respect of input services is raised in the name of head office/regional office, etc., while the services are actually received in the factory / factories or premises of the service provider. Similarly, in the case of services which are not specific for any particular factory or premises (such as advertising, market research, management consultancy, etc.) the bills/invoices may be received in the aforesaid head office/ regional offices etc. In order to provide for a mechanism whereby the tax credit could be passed on the respective factory/ premises, such head office/ regional offices will have to take up the responsibility of distributing the tax credit to these units through the medium of invoices. Such offices of the manufacturer or service provider are designated as ‘input service distributor’ under rule 2(m).
Definition of Input Service distributor:-
“Input Service Distributor” has the meaning assigned to it in clause (m) of rule (2) of CENVAT Credit Rules, 2004:- “Input service distributor” means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be;
Procedure of Registration as Input service Distributor :-
1) Application for registration would be submitted to Jurisdictional Central Excise Office, in duplicate in Form ST-1. Photocopy of the PAN and proof of address must be enclosed.
2) Copy of PAN card is necessary as a PAN based code (Service Tax Code) would be allotted to every assessee.
3) A person liable to pay service tax should file an application for registration within 30 days from the date on which the service tax on particular taxable service comes into effect or within 30 days from the commencement of his activity.
4) An assessee should get the registration certificate in form S.T.2 (registration number) within 7 days from the date of submission of form S.T.1, under normal circumstances.
5) A fresh registration is required to be obtained in case of transfer of business to another person. Any registered assessee when ceases to provide the taxable service shall surrender the registration certificate immediately.
Procedure for CENVAT credit Distribution:-
Every input service distributor distributing credit of taxable services shall, in respect of credit distributed, issue an invoice, a bill or, as the case may be, a challan signed by such person, or a person authorized by him, for each of the recipient of the credit distributed, and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely:-
(i) the name, address and registration number of the person providing input services and serial number and date of the invoice, bill or, as the case may be, challan issued under sub-rule (1);
(ii) the name and address of the said input service distributor;
(iii) the name and address of the recipient of the credit distributed;
(iv) the amount of credit distributed.
Provided that in case the input service distributor is an office of a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, providing service to a customer, in relation to banking and other financial services, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, but containing other information as required under this sub-rule.
Prescribed conditions for distributing the CENVAT credit:-
Rule 7 prescribes two conditions for compliance by the input service distributors while distributing the credit viz., :-
1. The credit distributed against an invoice, bill or challan referred to in rule 9 does not exceed the amount of service tax paid thereon. If the input services distributor has paid against one Invoice of an input service provider, say, Rs.5,000 as service tax, the aggregate amount distributed by him to the various units should not exceed Rs. 5,000. The distribution of credit must be done separately in respect of each invoice / bill / challan.
2. If a unit is exclusively engaged in manufacture of exempted goods or providing of exempted services, credit of service tax attributable to any service used by that unit should not be distributed. This is in consonance
with the provisions of rule 6(1) which prohibits availment of CENVAT credit on input services used exclusively in the manufacture of exempted goods or in providing exempted services.
Returns to be filed by Input Service Distributor:-
The Input Service Distributor is also required to file a return, on half-yearly, giving details of credit received and distributed in ST-3 Form duly signed by the Authorized Signatory.
Note :- An input service distributor does not take CENVAT credit, and his job is to distribute the credit as stated above.
Flow Chart showing the process of Registration, receiving Invoices of Taxable services and distributing the Input Services, by the Input Service Distributor