Cenvat Credit on Works Contract

Dear Sir,

Good day to you, Appreicate your support in helping me out in clarifying my friend is having a Interiror Desigining Firm which executes works contract for the clients.

we collect 4.12% service tax on whole work order.

please let me know whether we can take cenvat input credit for the phone bills which we use for the official purpose , and input service tax paid for the consultants who work on behalf of us at the site etc. and also please let me know when to pay the service tax . whether we have pay once the invoice is done at the end of the project completion or as and when we recieve the advance from the client for the execution of the work if so as and when we recieve the advace, request you to tell me how much percentage of service tax has to be paid out of the advance received.

thanks

Srikanth Alladi

9703020990

Hi,

Refer to Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 -

Rule 3 (2) states that "The provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004."

That is restriction is only on inputs & not on input services and capital goods for which normal provisions of Cenvat Credit Rules, 2004 (incl. Rule 6 which talks about use of input services for exempted & taxable services) will be applicable.

As regards the payment of service tax, Pl. refer to Rule 4A of Service Tax Rules, 1994 which states that "Every person providing taxable service shall not later than fourteen days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier issue an invoice"

Therefore within 14 days of receipt of advance invoice must be raised & amount of service tax on such advance shall be paid to the govt monthly or quarterly as the case may be.