CENVAT Credit on Works Contract Service

[Sumeet Tholle]

Dear All,

One of my client is hotel, providing mandap keeper, accomodation, renting (as some portion rent out to bank) service.

He engaged works contractor for construction of some portion of building (with material). Contractor charging Service Tax. Can my client claim CENVAT credit. Position after 01/04/2011 to 30/06/2012 and position after 01/07/2012.

For some portion, he purchased steel, cement etc. and paid excise duty on that and constructing building. Can he claim excise duty as CENVAT credit. If yes 50% or 100% in Ist year.

Pl. reply.

Thanks.

CA Sumeet Tholle

 

 

 

 

[Surender Gupta]

It may be legally correct, but practically, assuming, you are paying full rate of service tax on works contract on its 100% value (inclusive of material used therein), you may avail 100% credit on cement and steel during the first year itself.

[Sumeet Tholle]

Sir, Thanks for your reply.

But I have some doubt as change in defination of "input" w.e.f. 01/04/2011.  

Credit of service tax paid on works contract service, Commercial construction Service,Architect Service etc. and excise duty paid on steel, cement for construction of building  is excluded in defination.

Pl. guide.

Thanks.

Sumeet Tholle, CA

 

 

AI Summary

CENVAT credit on construction services and material duties restricted after definition change; credit possible if tax paid on inclusive value. If service tax on works contract is paid at the full rate on the 100% inclusive value (including materials), the recipient may avail full CENVAT credit on inputs such as cement and steel; however, an amended definition of 'input' excludes credit for works contract service, commercial construction service, architect service and excise duty on steel and cement when used in construction, creating a direct conflict between practical credit claims and the statutory exclusion.