Availment of Cenvat Credit-reg

[N Balachandran]

Sir,

We are in process of submitting offer for  Design & Engineering, Shaft Construction & Furnishing, Supply of Equipments, Civil Structural Architectural Work, Erection, Installation, Testing & Commissioning including Maintenance during the Warranty period  to Various Mines Company.

If we charge the Service tax @ 12.36% on 40% value of Total Contract Value as per rule 2A .of Service tax rule,  Will the customer able to take Cenvat Credit ?.  Pl clarify

Regards

N.Balachandran

 

 

[YAGAY andSUN]

CENVAT credit would be available to your customs according to the provisions of CENVAT credit Rules, 2004 as amended time to time.

From 01-04-2011, in the definition of Input Services, drastic changes had been incorporated, if the services provided by you to your customer fall under the category of Input Services, then, it would be available otherwise not?

[Vijay kumar]

In order to ascertain whether input credit is available, both the input service and output service/finished goods are required to be known to examine the nexus between the two in terms of Rule 2(l) of CCR, 2004. In your case, obviously the input service is works contract service but the output service is not mentioned. The customer is a mining company. Whether they are manufacturing dutiable goods or providing taxable service and if so, what is the description and nature thereof may be given, to clarify your query.

[Radha Arun]

In principle the customer can take Cenvat credit of the works contract service as an input service for the taxable output service of mining. However, some types of construction activity are excluded from Cenvat, viz., construction of a building or civil structure or part thereof, and laying of foundation or making of structures for support of capital goods.

AI Summary

Cenvat credit availability depends on whether works contract service qualifies as input service and has nexus to taxable output. Cenvat credit of service tax on composite works contract depends on whether the received services qualify as input services and satisfy the statutory nexus to a taxable output. Works contract service may be admissible for a mining company's taxable output if nexus is established, but specified construction activities-construction of buildings or civil structures and laying foundations or supports for capital goods-are expressly excluded from credit.