Cenvat Credit of Ser Tax paid on Works Contract Services

[R MUTHURAJ]

Hi,

A Company viz., X engages another company viz., Y for construction of new factory. The company Y (Service provider) constructs the building and issues bill to X (Service Receiver) indicating the VAT & Service Tax on materials and labour respectively .

The question is whether the X (Service Receiver) is eligible to take credit of the VAT and the Service Tax paid.

Kindly clarify with the supportive views.

 

Regards,

R.Muthuraj

AI Summary

Can Company X Claim Service Tax Credit on Construction Contract Under Cenvat Credit Rules 2004, Rule 2? A company, X, hires another company, Y, for constructing a new factory, with Y issuing a bill that includes VAT and Service Tax. The query is whether X can claim credit for these taxes. One respondent clarifies that, per Rule 2 of the Cenvat Credit Rules 2004, credit for Service Tax on works contract services is not allowed unless the receiver is also a service provider in construction. Another opinion suggests that Service Tax input can be set off against Service Tax liabilities, such as rental services, but not against central excise duty on produced goods.