Analysis of construction of complex service- old & new abate

Notifications 9117 views 3 replies

CA CS Amit S. Kedia

KKCL-KILLER JEANS

6920 Points Joined January 2009

Analysis of Construction of Complex Service- Old & New abatement Notification

Notification No. 1/2006 dated 1st March, 2006 specified certain percentage of the gross amount charged by such service provider for providing the taxable service as the taxable service.

The said notification (as amended from time to time) has specified the taxable portion being 33% where value of land is not included (25% in case value of land is also included) in the gross amount charged on the following conditions-

The CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004

The service provider has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003[G.S.R. 503 (E), dated the 20^th June, 2003].

Notification No. 26/2012 dated 20^th June, 2012(W.E.F. 01/07/2012) has also specified certain percentage 25% of the gross amount charged by such service provider for providing the taxable service as the taxable service if the value of land is included in the amount charged from the service receiver on the following conditions-

CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004.

The value of land is included in the amount charged from the service receiver.

Analysis:-

It can be seen from the above two notifications that from the 01^st July 2012, Cenvat Credit of duty paid on Capital Goods and Service tax paid on input service used for providing such taxable service can be taken under the provisions of the CENVAT Credit Rules, 2004.

This would great benefit to builders and developers.

Thanks

CA CS Amit kedia

Replies (3)

CA Manish Garg

Joint Manager - F & A

44 Points Joined June 2009

As regards to the same, I've understood that cenvat credit on capital goods (i.e Excise Duty) and Service Tax paid to external contractor/ other service provider can be taken as input against Service Tax Payable, and the bar is on the inputs of materials (i.e Cenvat Credit on Purchase of consumables).

I want to know that is the below mentioned clause is also effective after the above changes:

1. Service Tax on Works contracts earlier paying @ 4.8% under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.

if Yes, than is the Inputs of Cenvat Credit and Service Tax can be claimed under such conditions.

CA CS Amit S. Kedia

KKCL-KILLER JEANS

6920 Points Joined January 2009

Yes, it is very much clear from the above extacts of the notifications... now it is possible to take credit of input service like labour service, architect service, etc which is major input service in construction service.

Also, the excise duty on capital goods puchased for construction of building etc can also be availed.

It is going to give big advantages to builders etc...!!!

CA Ankit Jha

Manager - Accounts & Finance

50 Points Joined May 2010

As per notification no. 26/2012 it has become clear that CENVAT Credit in respect of capital goods and input services (as defined under rule 2 of CENVAT Credit Rules, 2004) has been allowed w. e. f. 01.07.2012. (CENVAT credit in respect of inputs shall not be allowed). to the builders in respect of construction of residential complex

As due to taking the benefit of abatement ,construction of complex service will cover in exempted service as per rule 2(e) of CCR 2004,

as per notification no. 28/2012 - central Excise (NT) date 20-06-2012

‘(e) “exempted service” means a-
(1) taxable service which is exempt from the whole of the service tax leviable thereon; or
(2) service, on which no service tax is leviable under section 66B of the Finance Act; or
(3) taxable service whose part of value is exempted on the condition that no credit of inputs and input
services, used for providing such taxable service, shall be taken;

as per notification no. 26/2012 service tax we can take the credit of input service so, my question is whether construction service will cover in exempted service or not?

If it is covered under exempted service then cenvat credit are required to reverse as per rule 6 or not?

CA Ankit Kumar Jha

caankitjha @ gmail.com

9560680840