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

Cenvat credit restriction on works contract services limits service tax credit eligibility for service receivers.
The Cenvat Credit Rules exclude the service portion in execution of a works contract and construction services from the definition of input service, so cenvat credit cannot be taken by a person in respect of works contract service except where that person is itself a provider of construction services; service tax credit on factory construction cannot be used against central excise on goods removal but may be set off against service tax on rental services, with carry-forward recommended.