“Input service distributor” under service tax

By | November 13, 2013

“Input service distributor” under service tax


“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  distributes such credits to its units providing taxable services or manufacturing excisable goods.

After making the payment of service charges and Service tax, Input service distributor can avail the credit provided service received is input service and distribute it to various manufacturing units or service providing units.

Registration:  An input service distributor is required to take a separate registration. they have to obtain registration from the Service Tax Authorities within 30 days. They have to apply in Form ST –1 and have to obtain Registration Certificate in Form ST-2 within 7 days (under normal circumstances)

A fresh registration is required to be obtained in case of transfer of business to another person. And if assessee ceases to provide the taxable services surrender the registration certificate immediately.

Return:  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.

The Input Service Provider can distribute the service tax paid by it subject to the following conditions.

  • The credit distributed shall not exceed the amount of service tax paid by it.
  • The credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed.

It is important to note that there is no requirement to distribute the credit proportionately. The Input Service Distributor can distribute to various units as the circumstances warrants. There is no rule regarding periodicity of distribution.

Issue of Invoice: Rule 4A (2) of the Service Tax Rules, 1994 deals with the issue of Invoice by the Input service distributor. The Invoice shall be serially numbered and contain the following particulars;

  • The name, address and registration number of the person providing input services and the serial number and date of invoice;
  • The name and address of the Input service distributor.
  • The name and address of the recipient of the credit distributed.
  • The amount of the credit distributed.

If the Input distributor is a banking company or a financial institution, the invoice need not be serially numbered.

Maintenance of Records: Rule 9 of CENVAT Credit Rules, 2004 deals with maintenance of records by the Input Service Distributor. The records maintained by the Input service distributor must contain the following:

  • Serial number and date of the document on which the CENVAT credit is availed
  • Service Tax registration Number and name of input service provider
  • Description and value of input service
  • Service tax credit availed
  • Basis of allocation/apportionment of credit amount
  • Service tax utilised for distributing the credit
  • Balance credit available for distribution

by C.A. Deepika Pamecha

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