Input Service [Rule 2(l)]:
I. Meaning: Input service means any service, –
(i) used by a provider of output service for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and
II. Inclusions: Input service includes:-
Services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
III. Exclusions: Input service excludes:-
(A) Following services, if they are used for construction or execution of works contract of a building or a civil structure or a part thereof; or laying of foundation or making of structures for support of capital goods:-
(i) Service portion in the execution of a works contract
(ii) Construction service as listed under section 66E(b) of the Act.
However, if works contract services are used for provision of construction services, or vice versa, they shall be eligible as input services.
(B) Services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods
ANALYSIS: It implies that the credit of the service tax paid on hiring of the motor vehicles, which are eligible as capital goods, is available.
(BA) Service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used by –
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such person
ANALYSIS: The credit of the service tax paid on insurance, servicing, repair, maintenance etc. of the motor vehicles which are eligible as capital goods, is available.
Exceptions: Credit of the service tax paid on insurance, servicing, repair, maintenance etc. of the motor vehicle, even if not a capital good, is available to the following:-
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such person.
In other words,
(a) A manufacturer of motor vehicle can avail credit of the service tax paid on the insurance and on the repair and maintenance of the motor vehicles manufactured by him.
(b) A motor insurance company can avail credit of the service tax paid on the reinsurance and third party insurance and repair and maintenance of the motor vehicles insured /re-insured by them.
(C) Services such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee.
ANALYSIS: The aforesaid services are not eligible as input services only when they are used primarily for personal use or consumption of any employee. Further, the list is only illustrative and not exhaustive.
Note: With regard to determination of place of removal in case of export of goods, following has been clarified:
(i) Place of removal in case of direct export of goods by the manufacturer exporter to his foreign buyer will be the port/ICD/CFS where the shipping bill is filed by the manufacturer exporter.
(ii) Place of removal in case of clearance of goods from the factory for export by a merchant exporter will be the factory gate. However, in isolated cases, it may extend further also depending on the facts of the case, but in no case, this place can be beyond the Port/ ICD/CFS where shipping bill is filed by the merchant exporter.
[Circular No. 999/6/2015 CX dated 28.02.2015]