Availment of Service tax credit

[Guest]

Dear Sir,

We are a mfg co and we as a Head office are registered under Service tax as a ISd Please explain whether we can avail Service tax credit on Painting and repairing of walls service under works contract service and furhter of Carpentary Service as a input service.

[Rajagopalan Ranganathan]

Sir,

According to rule 2 (l) of CENVAT Credit Rules, 2004“input service” means any service, -

(i) used by a provider of ²⁶[output service] for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal,

and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal.

But the same rule but 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; or

(b) laying of foundation or making of structures for support of capital goods.

In view of the above credit of service tax paid on repairing the building of you factory or premises from where output service provided is available. But in respect of carpentry service if it is in the nature repairing the existing wooden works the same is available. If it is for creation of new assests then the credit is not available.

AI Summary

Input service definition permits tax credit for repairs and renovation of premises but excludes credits for works creating new assets. Input service under the CENVAT Credit Rules includes services used for renovation or repairs of a factory or premises, but excludes the service portion of works contracts and construction services insofar as they are used for construction/execution of buildings, laying foundations, or creating structures supporting capital goods. Service tax on repairs of existing premises is eligible for credit; repair carpentry qualifies, whereas services creating new assets do not.