Input service credit

[Sanjeev Chauhan]

Respected Sirs,

Please guide, One p. ltd. co. is a builder and engaged in Construction of Residential Complexes. The said co. is paying brokerage charges to broker for sale of flats and taking credit of service tax paid on brokerage by the broker.

Also, the co. is engaged in providing project management & consultation services to other builders and using the same service of the said broker for sale of flats of other builders.

Now, the service tax department is saying that the s.t. paid on brokerage charges does not fall under the definition of input services and thus not eligible for taking credit.

Is the co. is eligible to take credit of the said input service or not.

Regards.

[A Wilson]

Dear Sir,

Generally, whatever the input services used for providing output services are eligible for Input Credit. 

Here the service tax paid on Brokerage is used for providing two types of Services.

1. One is for Sale of Company Owned Flats under Construction Service
2. And other is for sale of other company Flats under Project Management & Consultation Service.

So to avoid unnecessary  litigation, you may get two separate brokerage bills from the Broker with relevant details to prove these are relating to the particular Services and can be take credit for each services separately.

Thanks & Regards,

A.Wilson

AI Summary

Input service credit: separate brokerage invoices tied to each output service support claiming credit for brokerage tax. Eligibility for input credit on service tax paid on brokerage depends on whether brokerage services are used in providing taxable output services. The company employs brokers for selling its own construction flats and for sales under project management and consultation services. To counter the department's objection, obtain separate brokerage invoices allocating charges to each specific output service, thereby providing documentary proof of nexus and enabling input credit claims tied to each service stream.