Service Tax Credit on Construction Consultancy Charges

[Bhairob Chandra Bor]

Dear Expert,

we are under the construction of a factory cum office building . Basement, Ground and 1st Floor for Factory and 2nd floor for office. we are not available service tax credit on the construction bills. Kindly advice for the following:

1. are service tax credit available on Architect Fee, Electrical and Interior design consultancy etc.?

2. are service tax credit available on charges on electrical fitting, ac installation and other charges, if separate contract are given for the factory part and office portion ?

3. also advice if separate contracts are given to a same supplier for supply of materials and erection/installation then are service tax liable for materials also (materials are supplied along with applicable tax rates) ?

4. is the labour cess applicable for construction of factory building also? like in our case?

Kindly advice.

kind regards,

bcb

[Indian Commerce]

By:- S.Shanmugam

Service Tax Credit on Construction Consultancy Charges

Hi,

First of all, you are already aware of the meaning of Rule 2(l) of Input Service and properly ignoring the CENVAT Credits on setting up activities. I hereby clarify you the following in my opinion,

1.As referred by you, all the services received relates to setting up activities are not to be considered as Input service.

If you receive a service towards modernization, then you are eligible. According to me, If you place an order for Interior design consultancy separately, for the purpose of modernizing of both your factory and office premises, you can avail CENVAT Credit of the Service tax paid for Factory modernization for your Excise duty payments and for office modernization for output service payments.

2. As above explained, if you place an order for the service portion alone for all such activities, for the purpose of modernization, repair or maintenance of your factory or office premises, then it will be cenvatable.

3. When there is a separate contract for both supply and service portion, then there is no Service tax applicable on the supply portion.

4. In my opinion, labour cess @1% is applicable for this activity also.

Regards

SS

AI Summary

Service tax credit eligibility limited to modernization/repair; supply contracts not taxable and labour cess applies. Services for setting up a new factory or office are excluded from CENVAT credit as input services, whereas separately procured services for modernization, repair or maintenance of factory or office premises are eligible for credit; separate contracts for supply of materials are treated as supply-only (not subject to service tax) while service/erection contracts are taxable; labour cess is applicable to the construction activity.