Input Service credit - Reg

[vinay wakde]

Our company had purchased  land for expansion of existing plant. The land is part of factory premises. The service providers had provided various services i.e.  Cleaning, Excavation, leveling, filling to develop the land for  new project. The Professional & liaisoning services are also received.

Kindly guide us whether we are eligible to take Input service credit against the Bills received by us for said activities/ services?

Regards,

VINAY

 

[YAGAY andSUN]

Yes, you can avail the CENVAT credit as such services are very much included in the definition of Input Services.  Please refer the definition of Input Service under Cenvat Credit Rule, 2004 as amended time to time.

[Lohita Tatineni Tatineni]

1.As per the  Rule2(l) of cenvat credit rule 2004, Input service is defined as the services used inrelation to setting up, modernisation,renovation ,repairs of a factory,premises of service provider or an office relating to such factory or premises 

2.The  services are being used for expansion of the existing project ,hence they are input services and credit can be availed.

3.The credit can be availed only after payment of service tax see rule4(7).

4.The credit so availed can be utilised for payment of duties or taxes as per Rule 4 of cenvat credit rules.

5.The service provider must issue an invoice evidencing such payment on basis of which you can claim credit.

Regards,

Lohita

 

[YAGAY andSUN]

You may avail the CENVAT credit immediately without payment of service tax but in this scenario payment of said invoices should be made within 90 days from the date of invoices or bills.  Otherwise you would have to pay interest and reverse the CENVAT credit on Input servces.  You can again avail the reversed CENVAT credit after making payment of the Invoices.  This change was implemented in the Finance Budget'2011.

[Vijay kumar]

It may be observed that the phrase "setting up" has been deleted from the definition of input service w.e.f. 1.4.2011 and presently only modernization, renovation and repairs are included. If the purpose is to set up the land acquired for a new project, Department may certainly raise objection since it does not amount to modernization, renovation or repairs of the existing facility. Hence it is better to seek clarification from the Department before availing the credit to avoid undue litigation at a later date.

[sv bhasker]

Sir

I agree with Mr Vijay Kumar that 'setting up' has been deleted from the input servicce definition w..f 1.4.2011 and credit needs to taken only  in consultation with departmental officers.

AI Summary

Input service credit restricted by scope and requires timely payment or face reversal with interest and scrutiny. CENVAT credit for services used in developing factory premises is available only where services fall within the definition of Input Service (modernization, renovation or repairs), supported by supplier invoices; if credit is availed before paying the supplier, payment must be made within the prescribed period or the credit must be reversed with interest, and the deletion of 'setting up' from the input service definition limits credit for initial establishment activities and may attract departmental scrutiny.