input credit of service tax paid on storage cost

[Asked by Guest]

One of my client is engaged in trading and services liable top service tax. The services mainly in the nature of repair & maint , installation etc. on which he claim and pay service tax , subject to input credit from sub contractor. He is also doing trading of sugar , grains for which he has taken warehouses on which , he pays service tax on storage cost. Can he claim input credit of storage cost charged by warehousing corporation.

[Surender Gupta]

From the query it appears that warehouse is not being used for providing output service. Your client is not entitled to claim cenvat credit paid on storage cost.

Input tax credit can be claimed only in respect of input services. Input service is defined u/r 2(l) of Cenvet credit Rules, 2004 as used by a service provider for providing output service or ....... In the instant case, the storage services are being obtained in relation to the trading activity only. So these storage services can not be termed as input service. Thus credit of service tax paid on storage service should not be available against the tax liability on repair/maintenance, installation etc.

AI Summary

Input credit of service tax: storage for trading does not qualify as input service and cannot offset service tax liability.
Input credit of service tax is confined to input services used in providing an output service under the Cenvat Credit Rules, 2004. Storage or warehousing obtained solely for trading does not qualify as an input service and therefore cannot be treated as Cenvat credit against service tax liability on repair, maintenance, installation or other output services.