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May 14, 2003
Notification No. 5/2003 - Service Tax
In exercise of the powers conferred by 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 :-
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:-
O 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..
V Sivasubramanian
Deputy Secretary to the Government of India
F. No. B-3/6/2003-TRU
Note :- The Principal rules were notified vide notification No. 14/2002- Service Tax, dated the 1
st
August, 2002 published in
the Official Gazette of India, vide G.S.R. 542 (E), dated the 1
st
August 2002 and were last amended vide notification No.
1/2003-Service Tax, dated the 1
st
March, 2003, published vide number GSR 155 (E), dated the 1
st
March, 2003.