Input Service credit - New construction service in plant.

[vinay wakde]

We have received Input service i.e. Commercial Construction service in our plant. The said service  includes excavation of soil, PCC/RCC work, tor steel work etc. The construction service is required for installation of new Coolng tower in existing plant. The service provider had paid service Tax on  50% value of the services under works contract after claiming 40% abatment.  In the matter kindly clarify me the following :-

Whether we are eligible for taking Input service credit  to the extent of service tax paid by the  service provider, in view of the  definitation of  CENVAT on Input services? Whether, the credit of input services for new construction work is still eligible though the word "Setting up"  is excluded from the defination.

Regards,

VINAY 

[YAGAY and SUN]

No, since w.e.f. 01-04-2011, it is not allowed on construction activities including setting up of factories etc.

[JAMES PG]

Apart from the ineligibility of ST paid on 50% value, under reverse charge mechanism, service receiver is also required to pay remaining half of the ST, whcih will also be ineligible

AI Summary

Input service credit ineligibility: construction services for new installations barred and reverse-charge payments also non-creditable.
Construction-related input services used for installing a new cooling tower-comprising excavation, PCC/RCC and tor steel work-are excluded from input service credit under the CENVAT definition; service tax paid by the provider (after works-contract abatement) and any tax discharged by the service receiver under reverse charge are not eligible as credit.