Input credit

This query is : Resolved

shashank (Querist)
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20 January 2009 We are in the business of construction of mobile towers and renting the same.
We charge service tax on such rent.

We take services from contractors for construction & installation of towers against which they charge service tax on such services.(service tax on works contract)

This would be services for construction of fixed assets.

Now my question is whether we can get input credit on such services?

Also suggest wether we can get input credit for excise duty paid for purchase of capital goods.

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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22 January 2009 The cenvat credit is available for inputs used in providing the service. However the ST would have to be paid on the entire value including materials @ 12.36 % for you to be able to claim the cenvat credit of materials.

shashank

shashank (Querist)
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23 January 2009 Thank Mr. Madhukar,
BUT

The material are not input material, they are capital assets which we rent out.

Hence my question stands whether we can take credit of service tax paid for services used in construction of capital goods. This capital assets are rented out and its a source of income to the company which is taxable.

CA Amarpal

CA Amarpal (Expert)
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24 January 2009 Dear Shashank,

As per given facts, lets solve the problem step by step:-

(1)First of all, you are not a manufacturer as the construction of immovable property does not amount to manufacture. Hence, you can not claim the cenvat on inputs or input services used in construction of towers.

(2)You are a service provider.

(2)(i) Now, the constructed towers are not covered by the definition of "capital goods" prescribed under rule 2(a) of CENVAT Rules, 2004.

(2) (ii) However, the input services used in constraction of towers can be covered by the definition of "Input Services" prescribed under rule 2(l) of CENVAT Rules, 2004,if you establish that this input services are used in providing of services or are included by the inclusive part of the above definition.

(refer Rule 2(l)of CENVAT Rules, 2004)

With best wishes
for any clarification, please mail me at
amarpal@icai.org

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