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Cenvat Credit On Warehouse Rent

Lalit (accounts) (195 Points)

16 May 2011

We are receiving rent from our warehouse and charge service tax on rent. In other cities, we use warehouse of others and pay rent and service tax thereon. We have been claiming Cenvat credit on rent paid against service tax payable of rent received since 2008.

In scrutiny, assessing officer has dissented from our stand on cenvat credit. Is his stand correct and if yes, what remedies we have? Assessment proceeding is still going on.

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9 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 16 May 2011

apply for centralized registration , and include the godown in that, this will resolve the prob.

Lalit (accounts) (195 Points)
Replied 16 May 2011

Sir,

We already have centralised registration. but how it will help us?

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 16 May 2011

Prior to the amendment w.e.f.01-04-2011, it appears to be admissible as it was settled that any input service relating to business may be admissible. However, from 01-04-2011 the scope has been restricted in that the input service shall be used for providing output services or shall be used in relation to specified activities such as sales promotion, repairs of premises etc. It seems to be inadmissible.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 16 May 2011

if the godown is in your centralized registration , then department can not deny the input credit to be adjusted for service tax liability of taxable services provided .rent

share their grounds

Lalit (accounts) (195 Points)
Replied 16 May 2011

Thanks Mr. Nair and Mr. Shrma,

Could I have any relevant case law?

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 16 May 2011

no need of case law,

as your business is related to take commercial places on rent and rent out the same , by taking service tax input credit and paying service tax after adjusting the input credit.

however if audit / R/O is making noise to allow the same, there may be some valid reason for it.

in my view if the godown so taken on rent, did not qualified as input service, or your registration did not permited it, then only they have to put objection.

without details its not wise to comment on indirect taxes matter.

Lalit (accounts) (195 Points)
Replied 17 May 2011

We are in business of purachse and sale of commodities only. We pay warehouse rent on commodities we deposited in warehouse in various cities in India. On the other side, we own a warehouse which we have rented out.

We are not in the business to take commercial places on rent and rent out the same.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 17 May 2011

if your commdities business is subject to payment of excise or service tax, then only you will enjoy input credit.

business where excise or service tax is not applicable are not eligible o avail input credit, as in that case your such godown rent does not confirms the criteria for "input services" utilized for providing out put taxable services or producing exisable goods.