Renting of immovable property service - by a manufacturer-Cenvat Credit

[Ganeshan Kalyani]

Dear Experts,

I request you to please go through the below scenario and request you to please through some light on the same:

‘A’ a head office of a manufacturing unit pays service tax under reverse charge mechanism. Apart from that ‘A’ is having some extra space in the same premises, which it has given to its Sister concern ‘B’. In return ‘A’ receives Rental income including service tax for proportionate area occupied by ‘B’. The service tax so collected is paid to Gvt by ‘A’ under renting of immovable property. Additionally ‘A’ also collects maintenance charges from ‘B’ along with service tax and pays the service tax so collected to Gvt.

Now, ‘A’ has incurred some expenses for Maintenance of entire premises which has service tax element in the invoice. The query is that can ‘A’ claim proportionate service tax credit on maintenance invoice while making payment of the service tax of rental income and maintenance charges so collected from ‘B’.

I am of the view that, the maintenance cost incurred by ‘A’ is for entire premises. Since ‘B’ is also occupying the space the credit on maintenance can be utilized to pay service tax on rental income and maintenance charges received from ‘B’.

Please share your views. Thanks.

 

[Ganeshan Kalyani]

Can a manufacturer be a service provider also.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Answer to your second question is Yes. Across the board cenvat credit has been allowed w.e.f. 10.9.2004. Reply to your first question is under preparation.

[KASTURI SETHI]

Sir,

A is registered as service provider (Renting of Immovable Property) as well as service receiver (under RCM). Under which category of service is not known. Liability of discharging ST as service receiver under RCM is in no way linked with discharging liability as SP of Renting of Immovable Property. Further I concur with your view that only ptroportionate credi of ST paid on maintenance can be utilised for discharging ST liability for ROIP service.

[Ganeshan Kalyani]

Sir, Thanks for your valuable views. Sir, I have come across a case law ''TREAT CONVENIENCE FOODS Versus COMMR. OF C. EX. & SERVICE TAX, KANPUR 2013 (7) TMI 628 - CESTAT NEW DELHI'' which clarifies that only proportionate credit is allowed.

In the case, the Department was of the view ''that amount of credit should be restricted to the area let out i.e. 998 Sq. ft. as input service has been used in providing output service to the extent of area given on lease to M/s. Domino’s Pizza India Ltd. and according to Department the admissible credit is ₹ 17,982/- only. The balance amount of Cenvat credit was disallowed by Deputy Commissioner....''

Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Thanks for citation, Sir. You have virtually stamped my views by posting citation of relevant case law.

AI Summary

Proportionate cenvat credit allowed for renting of immovable property; credit may discharge rent and maintenance service tax liabilities. Proportionate Cenvat credit on input services for premises maintenance is available to a manufacturer who also provides renting of immovable property; the credit attributable to the leased portion may be utilised to discharge service tax on rent and recovered maintenance charges, subject to registration as a service provider and compliance with cenvat apportionment rules that restrict utilisation to the portion of input service used in supplying the taxable renting service.