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Centvat credit on renting of immovable property

Sankar (proprieor) (29 Points)

16 August 2013

Hi,

I have rented out my property and the service tax is collected for the same. Please help me out on following queries

1) I have installed a Lift in the same building and the service tax on installation of lift is charged by the lift company. Can I setoff the service tax charged by the lift company while paying same?

2) The lift company charges service tax on annual maintaince contract and the same can be setoff?

3)There is a genset provided to the tenant and the service tax on annual maintaince contract for the same can be set off?

4) My auditor charges service tax for his fees and the same can be setoff?

Thanks

R. Sankaralingam

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5 Replies

CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 16 August 2013

Dear Sankar,

1.Commercial or industrial construction service or works contract service is an input service for the output namely immovable property. Immovable property is neither subjected to central excise duty nor to service tax. Input credit of service tax can be taken only if the output is a ‘service’ liable to service tax or a ‘goods’ liable to excise duty. Since immovable property is neither ‘service’ or ‘goods’ as referred to above, input credit cannot be taken.

2., 3.and 4. As said in 1st point, input credit of service tax can be taken only if the output is a 'service' liable to service tax. And as all services (2nd, 3rd and 4th) are liable for service tax and thus being an Input for your service, thus, set-off is allowed.

Best Regards,
CA Lovely Arora
ca.lovelyarora @ gmail.com

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 17 August 2013

you are providing output Service and so you are entitled to take Cenvat Credit of the service Tax paid.

CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 17 August 2013

but prabhat sir, the 1st item of the query is with regards to immovable property i.e. Installation of lift and the same is exclusivily kept out of service tax credit, which is logical also, because the service tax credit/excise input should be allowed only on manufacturing/servicing of movable items.

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 17 August 2013

Since you are providing an output service and paying the Service tax,you are entitled to take credit of the Service Tax paid for providing output service i.e renting of immovable property.