CENVAT of Service Tax Paid on Works Contract for painting job of Civil Structure of Factory premises

[Ashish Bansal]

Dear Experts,

My query is regarding the issue of admissibility of Service Tax credit paid under works contract for Painting of newly constructed Building of Factory.

Rule 2(k) of CCR,2002 specifically excludes any input used for construction or execution of works contract of a building or a civil structure or a part thereof.

Rule 2(l) of CCR, 2002 excludes service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the finance act in so far they are used for construction or execution of works contract of a building or a civil structure or a part thereof.

To conclude the point of doubt is, 'Do the works contract for painting job is also covered under the above excluding clauses.'

Regards

Ashish Bansal

excludes,-

(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for –

(a) construction or execution of works contract of a building or a civil structure or a part thereof;

- See more at: http://taxguru.in/service-tax/cenvat-credit-input-services.html#sthash.aHE9VrsE.dpuf

excludes,-

(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for –

(a) construction or execution of works contract of a building or a civil structure or a part thereof;

- See more at: http://taxguru.in/service-tax/cenvat-credit-input-services.html#sthash.aHE9VrsE.dpuf

excludes,-

(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for –

(a) construction or execution of works contract of a building or a civil structure or a part thereof;

- See more at: http://taxguru.in/service-tax/cenvat-credit-input-services.html#sthash.aHE9VrsE.dpuf

[Mehul Pandya]

As a provider of Service of Work Contact you can avail service tax credit on painting Job Charges because as per rule 2(I) of CCR, input services are only those which are used for providing output service. Though the inclusive part of definition of input service expands the scope of Input Service, it can be argued that it cannot cover services not related to output services.

In my view you can take cenvat credit in respect of input services directly related to construction services. As far as input credit on Painting material concerns, cenvat credit of the same is not allowable.

[Ashish Bansal]

What if I am availing service of painting as a Manufacturer.

And service relates to one of my newly constructed factory building.

[PARTHASARATHY V]

You may be end up with SCN for demand of duty for the wrong availment of credit along with iNterest and penalty.

AI Summary

CENVAT credit on works contract painting: availability questioned where construction exclusions apply; claiming credit risks disallowance. Whether CENVAT credit is admissible for service tax on a painting works contract for a newly constructed factory depends on Rule 2(k) and 2(l) CCR,2002 which exclude inputs and service portions used for construction or execution of a building or civil structure. One practitioner argues painting job charges may qualify as an input service eligible for credit while painting materials are not creditable; another warns that claiming credit where exclusions apply risks a show-cause notice, demand, interest and penalties.