Common inputs for taxable and exempt services
1. Separate Accounts : Separate accounts are to be maintained for input service
meant for providing taxable output service and for use in the exempted
services. Credit should be taken only on that portion of input services which are
used for the output service on which Service Tax is payable.


2. No Separate Accounts : If separate accounts are not maintained, the provider
of output service shall pay an amount equal to eight percent of value of
exempted services or pay an amount equivalent to the CENVAT credit
attributable to input services used in, or in relation to provision of exempted
3. Full Credit to Certain Service Providers : However, in respect of certain
specified services (consulting engineer, architect etc.), even though no separate
accounts are maintained, CENVAT credit shall be allowed unless such services
are exclusively used in or in relation to the manufacture of exempted goods or
providing exempted services.
4. Full credit on Exports : It should be noted that exported service is not treated
as ‘exempt’ service for availing CENVAT credit.
(a) Refund of untilised CENVAT credit
Refund of accumulated credit is admissible only in case of exports of output
service. Where any input or input service is used in providing output service, the
CENVAT credit in respect of the input service so used shall be allowed to be
utilized towards payment of service tax on any other output service. If such
adjustment is not possible due to any reason, it will be allowed as refund
subject to the safeguards, conditions and limitations specified by the Central

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