Service Tax credit availment on 70% of Works Contract Service related to construction

[Guest]

Dear Sir,

We are a mfg co and registered under ISD,please advise us whether we can avail Service Tax Credit on charged 70% of value in case of Works contract Service relating to construction activities.Thanks & Regards.

[Ganeshan Kalyani]

Sir in my view service tax credit on construction is not eligible. Thanks.

[KASTURI SETHI]

Sh.Shinde Ji,

I concur with the views of Sh.Ganeshan Kalyani, Sir. I add that input service credit for providing Service portion of WCS and construction services listed under clause (b) of Section 66 E is allowed.( highlighted below)

2 (l) of Cenvat Credit Rules

Input Service means any service----

(i) ------------------------

(ii)------------------------

[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,

except for the provision of one or more of the specified services; or]

SECTION 66 (E)(b)

(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion-certificate by the competent authority.

Input service credit on construction service/WCS is not allowed but input service credit for specified services used for providing construction services is allowed. e.g. GTA, architect service etc.

Sh. Ganeshan Kalyani Sir, Pl. examine in detail. Looking forward your response today or tomorrow. Thanks.

AI Summary

Service tax credit on works contract disallowed for construction services; specified input services remain creditable. Input service credit on the service portion of works contracts and on construction services is excluded from Cenvat credit; however, input credit is available for separately identifiable specified services (such as transport or architect services) used in providing construction services, provided those services are not the service portion of the works contract or otherwise within the statutory exclusion.