In case of private company - regarding fixed assets
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
31 March 2015
Dear Experts,
Please guide me, we have a commerical Building in books after some time we repaire to building Rs. XYZ,
amount should be add in building or claim in expenses
Please guide me, we have a commerical Building in books after some time we repaire to building Rs. XYZ,
amount should be add in building or claim in expenses
31 March 2015
if the repairs increase the life of building then capitalise it else exp it as per AS 10.
Querist : Anonymous
Querist :
Anonymous
(Querist)
31 March 2015
Service tax related
We are doing trading whole sales bussiness cement/steel
some work in commission, we make a commission invoice
my query is can we take cenvat of Service tax on rent
We are doing trading whole sales bussiness cement/steel
some work in commission, we make a commission invoice
my query is can we take cenvat of Service tax on rent
29 July 2024
Let's break down the treatment of repairs to a commercial building and the implications of Service Tax/CENVAT credit in your situation:
### **1. Treatment of Repairs to a Commercial Building**
**1.1. Nature of Repairs:**
- **Capital Expenditure:** If the repairs are significant and enhance the value or extend the useful life of the building (e.g., major renovations or structural improvements), they should be capitalized and added to the cost of the building. This is because such repairs increase the asset’s value and are considered as part of its cost for depreciation purposes.
- **Revenue Expenditure:** If the repairs are routine and merely maintain the building in its existing condition (e.g., painting, minor repairs), they should be treated as an expense in the Profit & Loss Account. These do not enhance the value of the building but merely maintain its current state.
**Example Entries:**
- **Capital Expenditure (Repairs Enhancing Value):**
- **Debit:** Building Account ₹[Amount]
- **Credit:** Bank/Cash Account ₹[Amount]
- **Revenue Expenditure (Routine Repairs):**
- **Debit:** Repairs & Maintenance Expense Account ₹[Amount]
- **Credit:** Bank/Cash Account ₹[Amount]
### **2. Service Tax/CENVAT Credit on Rent and Other Services**
**2.1. Service Tax on Rent:**
- Under the Service Tax regime (before GST), you could claim CENVAT credit on the Service Tax paid for rent of premises if it was used for business purposes and if the business activity was eligible for CENVAT credit. However, service tax was abolished with the introduction of GST from July 1, 2017.
**2.2. CENVAT Credit and GST:**
- **Before GST:**
- Service Tax paid on rent for business premises was eligible for CENVAT credit, provided the premises were used for business purposes and the business was involved in providing taxable services or manufacturing goods.
- **Under GST (Post-July 1, 2017):**
- **Input Tax Credit (ITC) on Rent:** GST paid on rent for business premises is eligible for ITC. This means you can claim GST paid on rent as credit against your output GST liability, provided the rented premises are used for business purposes and the rent is related to taxable supplies.
**Example Entries for GST on Rent:**
- **Rent Payment:**
- **Debit:** Rent Expense Account ₹[Amount]
- **Debit:** Input GST Credit Account ₹[GST Amount]
- **Credit:** Bank/Cash Account ₹[Total Amount]
### **3. Service Tax on Commission:**
- **Service Tax on Commission (Before GST):**
- Service Tax was applicable on commission earned and could be claimed as CENVAT credit on services used in providing taxable services or manufacturing goods, if eligible.
- **Under GST:**
- GST on commission income is collected from the client. You must account for GST on your commission invoices and pay it to the government. You can claim ITC on GST paid on inputs/services used to provide the commission services.
**Example Entries for Commission Income with GST:**
- **Commission Income:**
- **Debit:** Accounts Receivable ₹[Commission Amount + GST]
- **Credit:** Commission Income ₹[Commission Amount]
- **Credit:** Output GST Payable ₹[GST Amount]
### **Summary:**
1. **Repairs to Building:**
- **Capital Expenditure:** Add to Building Account if it significantly enhances the value or extends the life.
- **Revenue Expenditure:** Claim as a repair expense if it merely maintains the building.
2. **Service Tax/CENVAT Credit:**
- **Before GST:** CENVAT credit on Service Tax for rent was allowed.
- **Under GST:** ITC on GST for rent is allowable if the premises are used for business.
3. **Commission and Service Tax:**
- **Before GST:** Service Tax on commission could be claimed as CENVAT credit.
- **Under GST:** ITC on GST paid on input services used for earning commission is allowable, and GST on commission income must be paid.
Implementing these practices will ensure compliance with accounting standards and tax regulations. If you have further specific queries or require detailed guidance, consulting with a professional accountant or tax advisor may be beneficial.
### **1. Treatment of Repairs to a Commercial Building**
**1.1. Nature of Repairs:**
- **Capital Expenditure:** If the repairs are significant and enhance the value or extend the useful life of the building (e.g., major renovations or structural improvements), they should be capitalized and added to the cost of the building. This is because such repairs increase the asset’s value and are considered as part of its cost for depreciation purposes.
- **Revenue Expenditure:** If the repairs are routine and merely maintain the building in its existing condition (e.g., painting, minor repairs), they should be treated as an expense in the Profit & Loss Account. These do not enhance the value of the building but merely maintain its current state.
**Example Entries:**
- **Capital Expenditure (Repairs Enhancing Value):**
- **Debit:** Building Account ₹[Amount]
- **Credit:** Bank/Cash Account ₹[Amount]
- **Revenue Expenditure (Routine Repairs):**
- **Debit:** Repairs & Maintenance Expense Account ₹[Amount]
- **Credit:** Bank/Cash Account ₹[Amount]
### **2. Service Tax/CENVAT Credit on Rent and Other Services**
**2.1. Service Tax on Rent:**
- Under the Service Tax regime (before GST), you could claim CENVAT credit on the Service Tax paid for rent of premises if it was used for business purposes and if the business activity was eligible for CENVAT credit. However, service tax was abolished with the introduction of GST from July 1, 2017.
**2.2. CENVAT Credit and GST:**
- **Before GST:**
- Service Tax paid on rent for business premises was eligible for CENVAT credit, provided the premises were used for business purposes and the business was involved in providing taxable services or manufacturing goods.
- **Under GST (Post-July 1, 2017):**
- **Input Tax Credit (ITC) on Rent:** GST paid on rent for business premises is eligible for ITC. This means you can claim GST paid on rent as credit against your output GST liability, provided the rented premises are used for business purposes and the rent is related to taxable supplies.
**Example Entries for GST on Rent:**
- **Rent Payment:**
- **Debit:** Rent Expense Account ₹[Amount]
- **Debit:** Input GST Credit Account ₹[GST Amount]
- **Credit:** Bank/Cash Account ₹[Total Amount]
### **3. Service Tax on Commission:**
- **Service Tax on Commission (Before GST):**
- Service Tax was applicable on commission earned and could be claimed as CENVAT credit on services used in providing taxable services or manufacturing goods, if eligible.
- **Under GST:**
- GST on commission income is collected from the client. You must account for GST on your commission invoices and pay it to the government. You can claim ITC on GST paid on inputs/services used to provide the commission services.
**Example Entries for Commission Income with GST:**
- **Commission Income:**
- **Debit:** Accounts Receivable ₹[Commission Amount + GST]
- **Credit:** Commission Income ₹[Commission Amount]
- **Credit:** Output GST Payable ₹[GST Amount]
### **Summary:**
1. **Repairs to Building:**
- **Capital Expenditure:** Add to Building Account if it significantly enhances the value or extends the life.
- **Revenue Expenditure:** Claim as a repair expense if it merely maintains the building.
2. **Service Tax/CENVAT Credit:**
- **Before GST:** CENVAT credit on Service Tax for rent was allowed.
- **Under GST:** ITC on GST for rent is allowable if the premises are used for business.
3. **Commission and Service Tax:**
- **Before GST:** Service Tax on commission could be claimed as CENVAT credit.
- **Under GST:** ITC on GST paid on input services used for earning commission is allowable, and GST on commission income must be paid.
Implementing these practices will ensure compliance with accounting standards and tax regulations. If you have further specific queries or require detailed guidance, consulting with a professional accountant or tax advisor may be beneficial.
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