CENVAT OF SERVICE TAX

[S.C. WADHWA]

An Individual has property in delhi which has been given on rent. As per agreement, rent is inclusive of all taxes present or  furture .Thus, the rent received by individual is inclusive of service tax. Such individual pays service tax out of such rental income. Now, query is whether such individual can avail cenvat of service tax paid on any service availed by him. Is it necessary that such service availed should be in relation to provision of output service or cenvat can be availed on any service whatsoever The income from rent is chargeable to tax under head  Income from House Property'

 

[YAGAY andSUN]

Dear Sir,

 

First of all, if you are paying property tax pertaining to the rented premises you may deduct this amount from the taxable amount of service provided by you in relation to renting of immovable property.  It would certaintly save some money for you.

Secondly, from 01-07-2012 the definition of input service under Rule 2(l) (i) has been amended - " used by a provider of output service for providing an output services.  If services received by you fall under the inclusive portion of the definition then you may avail the CENVAT credit and adjust it with output liabilities.

There would be no CENVAT credit available under the Clause A, B, BA,C.

AI Summary

CENVAT credit entitlement: input service must be used in providing the output service to qualify for adjustment. Whether a landlord receiving rent inclusive of service tax may claim CENVAT credit on procured services: the amended definition of input service requires the service to be used by a provider of an output service for providing an output service; if services fall within this definition the landlord may avail CENVAT credit and adjust it against output liabilities, but no credit is available for services covered by Clauses A, B, BA, C.