Availment of input service Credit on Works Contract Service

[Sanjeev Chauhan]

Respected All,

Kindly guide,

A sugar manufacturing  unit, (Co-Op. P. Ltd.)  is availing credit on Erection, Commissioning & Installation services and on construction services used for construction of Godown and other civil structures for the   period 2011-12 & 2012-13.

W.e.f. 01.04.2011 input service credit on Works contract services is denied in Cenvat Credit Rules. 

Is the assessee  allowed to take credit on Erection, Commissioning & Installation services and on construction services used for construction of Godown?

Regards,

Sanjeev.

 

[Brijesh Verma]

Dear Sanjeev

Allowability of Cenvat on Construction and allied services has always been a matter of dispute and divergent views. 

Till 31-3-2011 the definition of the term input service included within its inclusive part the words "Setting up" and as a result assessees used to take credit on Construction services, works contract, erection commissioning etc also.

However, w.e.f. 01.04.2011 the words "setting up" were deleted from the definition and new condition was imposed whereby Credit on service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for -

                    (a)  construction or execution of works contract of a building or a civil structure or a part  thereof; or

                    (b) laying of foundation or making of structures for support of capital goods

is not available.

Now as far as your query regarding availability of cenvat on Construction of godown is concerend, we are of the view that the same is not permissible. However, Erection commissioning and installation service has not been mentioned in the above exclusion and so one can raise a query that cenvat of the same is available. However, for that too we are of the view that since in the post negative list era (w.e.f. 01-07-2012) there is no specific mention of erection commissioning and installation services in the declared list hence the department would assume them to be either a part of works contract service or construction service and therefore taking cenvat of that service would be a risky proposition.

pls apply your professional judgment before advising. !!!

[Sanjeev Chauhan]

Respected Verma Sir,

Thanks a lot for your valuable suggestion. I was of the same view that since the said services are not specifically mentioned in the declared list of services, it would be the part of works contract services.

Sir, thank you very much for giving a detailed answer to the query in order to make me understand it properly.

Regards,

Sanjeev.

 

AI Summary

Cenvat credit denial on construction-related services limits input credit for works contracts, making credit for erection services risky. Cenvat credit on the service portion of works contracts and construction services used for building or civil structures or for laying foundations is denied following deletion of 'setting up' from the input service definition; credit on construction of a godown is therefore not permissible. Although erection, commissioning and installation services are not explicitly excluded, under the post-negative list regime they may be treated as part of works contract or construction services, making claims for credit on those services risky and requiring professional judgment.