Service tax paid on construction contract

[RameshBabu Kari]

Dear Experts,

We gave contract for the construction of building, for that contractor raised the bill with service tax. Such service tax paid on construction contract and can it be claimed against service tax payable on renting of same immovable property for commercial purpose ? if so under which section we can claim ?

What are the provisions and sections applicable ?

[Himansu Sekhar]

The input service credit availed on the construction services cannot be utilised for renting of immovable of property services. Rule 2(l) specifically deny this. Such credit can be utilised for payment of similar out put service. Ex. Wcs provided by sub contractor will be available to the main contractor providing wcs. Otherwise it is specifically excluded.

[RameshBabu Kari]

But i found below case law, which is

• Navaratna S.G. Highway Prop. (P.) Ltd. Vs. Commissioner of Service Tax, Ahmedabad [2012 (7) TMI 316 – CESTAT AHMEDABAD], wherein it was held that without utilizing the services, mall could not have been constructed and therefore the renting of immovable property would not have been possible and accordingly, allowed the Cenvat credit of Service tax paid on construction services;

Please clarify me the same.

[Himansu Sekhar]

The provisions were amended wef 01.07.12. Please read rule 2(l) A where in constructions services are excluded from such benefits except they are used for providing specified services I.e services under 66E(b) of finance act,1994. The case law is for the previous period. There is no ambiguity.law is very clear. You can ask further questions.

AI Summary

Cenvat credit on construction services barred from offsetting renting-of-immovable taxes after regulatory amendment. Input service credit on construction services cannot be utilised for renting of immovable property services because the relevant rule, as amended effective 01.07.12, expressly excludes construction services from credit use for renting, except where such construction services are used to provide those specified services retained by the amended provision; earlier case law permitting credit applied to the pre-amendment regime.