CENVAT OF SERVICE TAX

[S.C. WADHWA]

A manufacturing company employs secruity guard on contract basis for its factory where manufacturing activities are carried out. Company is required to pay service tax on services of security guards on recepient basis. It discharges excise duty on its products manufactured in factory.

Question is whether company can avail cenvat of service tax so paid on recepient basis against excise duty payable on excisble products manufactured.

[YAGAY andSUN]

Dear S.C.Wadwa,

Eligible, if in relation to manufacture or provision of taxable goods/services, modernization or repairs of factory or office, recruitment, storage, quality control, accounts, sales promotion, financing, computer networking.

Regards,

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[PAWAN KUMAR]

Dear Sir,

Cenvat credit is eligible on security services provided by the security agencies as per the definition of rule 2(l) of Cenvat Credit Rules, 2004. Read the latest rules in the Central Excise Manual of 2014-15.

[RENGARAJ R.K]

The Cenvat credit on input services viz., security services paid under reverse charge mechanism are eligible input and one can avail the service tax paid by the recipient (company) and also the portion of 25% paid by the service provider.

AI Summary

Cenvat credit on security services is available; recipient paid service tax under reverse charge can be credited against excise duty. Security services contracted for a manufacturing factory constitute input services under rule 2(l) of the Cenvat Credit Rules and are eligible for CENVAT credit when used in relation to manufacture or related factory/office activities. Service tax paid by the recipient under the reverse charge mechanism on such security services is allowable as credit against excise duty on dutiable goods, and contributors noted that the portion of tax borne by the service provider has also been treated as creditable in practice, subject to compliance with the Rules.