CENVAT Credit on Design Services

[Rakesh K Paliwal]

Dear Experts,

pl let me know about CENVAT credit eligibale or not on ' Design Service' provided to manufacturer, for the purpose of Design of Structure of  New plant.

Regards

Rakesh K Paliwal

[Ankit Gupta]

Yes you can avail the credit.

Ankit

Ankitguptatax at the rate of yahoo.com

[Guest]

Before the notification no. 3/2011-CE(NT) dated 1.3.2011 the definition of input service in cenvat creditrule 2 allowed CENVAT of setting up plant, which was eliminated after the above notification.

So, as per the CENVAT credit rules when you can not avail credit for setting up then no question of availing credit for services of design used in setting up of new plant.

[Ankit Gupta]

I would like to draw your kind attention to exclusive part of definition of Input Service which excludes only Work contract Service and Construction service in relation to

laying of foundation or making of structures for support of capital goods,

  Further, the design service is not excluded and the said service is covered in means part of the definition.

[Guest]

The Design service is in relation to construction of New plant and since setting up is excluded from eligibility for CENVAT credit, the credit of design services will not be available to you.

Further the credit of Design Service will be available to the Work contract Service / Construction service provider and not to you.

AI Summary

CENVAT credit restriction: design services for plant setup may be ineligible when plant setting activities are excluded. Availability of CENVAT credit for design services used in designing a new plant depends on whether such services are within the Input Service definition or fall under the exclusion for setting up a plant; one view treats design services as eligible input services, while another relies on a regulatory amendment excluding plant setup from eligibility, arguing manufacturers cannot claim credit for design services related to setting up, though work contract or construction service providers may claim credit.