Cenvat credit on professional services

Queries 1143 views 6 replies

ashwani dhawan

61 Points Joined February 2010

We are in a service industry provide taxable and exempt services both to our vaious clients. Recently we hv started a construction of building for which we are taking engineering/technical services from a company. since we are constructing an immovable property we r capitalising all the related costs as per provision of As-10. Required Solution for below queries:

1) Whether we can claim cenvat if we will provide taxable services from the under construction building in future by taking it as office for providing taxable services?

2) Whether we can claim cenvat if the same property will be leased out & service will be paid by us for the same?

3) Whether we can claim cenvat if we will provide taxable and non taxable services from the under construction building in future by taking it as office for providing taxableand non taxable services?

Kindly quote relevant rules, sections, notifications etc.

Rgds,

CA Ashwani Dhawan

Replies (6)

Madhukar N Hiregange

Chartered Accountant

39039 Points Joined September 2008

You need to read cenvat credit rules 2004 entirely to understand the eligibility and restrictions. Construction credits per se have been restricted and rule 6 )3) sets out how common credit can be availed.

ashwani dhawan

61 Points Joined February 2010

not satisfied, kindly elaborate....

Abhisek Rungta

PRACTISING CHARTERED ACCOUNTANT

234 Points Joined September 2009

Agreed with Mr.Madhukar that you have to refer Rule 6 (3) . As in your case , you are providing both Taxable and Exempt Services and if you want to avail Cenvat Credit , options are prescribed that :

1. Separte Books are to be kept.

2. Cenvat Credit can be taken on service utilised for exempt Services if Service Tax Tax is paid on exempt services - 5/ 6%.

Go through that Rule and as for your above question , you can take Service Tax Credit on input services for Construction business.

And for Construction business abatement is also there , so kindly refer that also.

ashwani dhawan

61 Points Joined February 2010

we are not providing construction business services to anyone but we a shipping co. providing various taxable services to our client, still we cn take cenvat..... ? kindly quote relevant rule/section.

Abhisek Rungta

PRACTISING CHARTERED ACCOUNTANT

234 Points Joined September 2009

Yes you can take credit subject to Rule 6(3) that you maintain Separte books of accounts for Exempt Services and you dont take credit on Input Services used for exempt Services.

Saransh S

CA Practice

39 Points Joined February 2013

Your issue needs to be categorised into two baskets for the sake of clarity in understanding.

1) The first issue is whether you are entitled to avail credit of servica tax paid on certain services, which were used for construction of a building. Given your fact pattern that you do not provide construction services to your customers/clients and the brief information provided by you regarding the nature of the input services, it would seem unlikely that you are eligible to avail CENVAT credit on such services (Rule 2(l) of the CENVAT Credit Rules, 2004). Further clarity on the nature of the subject input services would help in taking a more reliable stand on the basis of the above Rule.

2) The other issue is regarding restriction of CENVAT credit on account of input services being used to provide taxable as well as non taxable service. Rule 6(3) of the CENVAT Credit Rules, 2004 provide certain mechanisms to compute such restriction.

Saransh S

H.M. Giriya & Co (Bangalore)

e-mail: saransh.giriya @ gmail.com