Cenvat Credit on the commission paid to sub-contractor

[puneet virmani]

X is a principal contractor engaged in sanitation workscontracts & paying service tax on 33% of value recieved after deducting WCT(sales tax),TDS(income tax) & retention amount.Further not claiming any other deductions.As principal contractor engages sub-contractor for execution of contract & paying service tax on payments to these sub-contractors.Kindly explain us with provisions whether main\principal contractor is entitled to claim cenvat credit paid to sub-contractor on input service.

[Surender Gupta]

Upto 28-2-2006 X was entitled to avail the Cenvat Credit of service tax paid by the sub contractor but from 1-3-2006 he is not entitled to avail the credit as long as he is availing the benefit of exemption of 67% under notificaion no. 1/2006

AI Summary

Cenvat credit on sub-contractor service tax denied while principal claims exemption under notification, affecting eligibility. The principal contractor was entitled to avail the Cenvat Credit of service tax paid by the sub-contractor up to 28-02-2006, but from 01-03-2006 he is not entitled to avail the credit while availing the benefit of the exemption of 67% under notification no. 1/2006.