G.S.R. (E).- In exercise of the powers conferred by sub-section (2) "OLD - clause (ee) of sub-section (2) " of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, further to amend the Service Tax Credit Rules, 2002, except as respect things done or omitted to be done before such amendment ,namely :-

(In above Opening para bold words has been corrected vide Corrigendum, Dt. 09/06/2003)

1. Short title and commencement.-
(1) These rules may be called the Service Tax Credit (Second Amendment) Rules, 2003.
(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Service Tax Credit Rules, 2002, (hereinafter referred to as the said rules),-

(i) in rule 2, in clause (b), for the words " taxable service", the word " service" shall be substituted;
(ii) in rule 3,-

(A) for sub-rule (1), the following sub-rule shall be substituted, namely,-

" (1) An output service provider shall be allowed to take credit (hereinafter referred to as service tax credit) of the service tax paid on input service in the following manner, namely:-

(a) where the input service falls in the same category of taxable service as that of output service, service tax credit shall be allowed to be taken on such input service for which invoice or bill or challan is issued on or after the sixteenth day of August, 2002; (b) in any other case, service tax credit shall be allowed to be taken on such input service for which invoice or bill or challan is issued on or after the fourteenth day of May, 2003:

Provided that the output service provider shall be allowed to take such credit, on or after the day on which he makes payment of the value of input service and the service tax paid or payable as indicated in invoice or bill or challan referred to in sub-rule (1) of rule 5.";

(B) in sub-rule (2) for the brackets and figures "(90)", wherever they occurs, the brackets and figures "(105)" shall be substituted

(C) in sub-rule (3), for the words " such output service which are exempt from whole of the service tax leviable thereon", the words, brackets and figures " such output service which is either exempt from whole of the service tax leviable thereon or is not a taxable service, except in the circumstances mentioned in sub-rules (4) and (5)." shall be substituted;

(D) after sub rule (3), the following sub-rules shall be inserted, namely,-

"(4) Where a service provider avails credit on any input service and renders such output services which are chargeable to service tax as well as exempted services or non taxable services, as the case may be, then the service provider shall maintain separate accounts for receipt and consumption of input service meant for consumption in relation to rendering of output services which are chargeable to service tax and the inputs service meant for consumption in relation to rendering of output services which are exempted services or non-taxable services, as the case may be. The service provider shall take credit only on that portion of input service, which is intended for use in relation to rendering output services, which are chargeable to service tax.

(5) In case the service provider, opts not to maintain separate accounts of input service meant for consumption in relation to rendering of such output services 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 per cent. of the amount of service tax payable on such output service.

(6) Service tax credit on the service provided in relation to telephone connection shall be allowed only in respect of such telephone connections which are installed in the premises from where output service is provided.";

(iii) In Form, after the heading "Service tax credit" and the table under it, the following shall be inserted, namely:-

å Output service (a) Description of output services in relation to rendering of which the input services are consumed:

(b) Whether separate account is maintained for receipt and consumption of input service meant for consumption in relation to rendering of output services which are taxable or exempted or non-taxable service: Yes/No.p.

[F. No. B-3/6/2003-TRU]

( V Sivasubramanian)
Deputy Secretary to the Government of India

Note:- The Principal rules were notified vide Notification No. 14/2002- Service Tax, dated the 1st August, 2002 published in the Official Gazette of India, vide G.S.R. 542 (E), dated the 1st August 2002 and were last amended vide Notification No. 1/2003-Service Tax, dated the 1st March, 2003, published vide number GSR 155 (E), dated the 1st March, 2003.

(Please see refer Notification. No. 06/2004-ST, Dt. 09/07/2004 for further amendments in Service Tax Credit Rules, 2002)