Input tax credit
This query is : Resolved
30 August 2012
Suppose, I have taken a shop on rent from a builder in a commercial centre for which he has raised the bill of lease rent charging service tax. And I'm a chartered accountant firm raising bills to my client charging service tax to them.
Now, my question is whether am I eligible for cenvat credit of service tax charged by the builder to me?
Please provide the answer with supporting of rules and provisions thereon.
Now, my question is whether am I eligible for cenvat credit of service tax charged by the builder to me?
Please provide the answer with supporting of rules and provisions thereon.
31 August 2012
For running any business, where service tax is payable, the cenvat on input of rent, lease rent is eligible including for CA firm. There is no direct rule or provision to quote. The cenvat credit rule says if the services availed are "in relation to" output services then it can be set off. Without office, the output services cannot be done.
31 August 2012
Ok sir, this is what I finally decided on after applying the basic rule of Cenvat Credit. Now, what if I buy the office instead of hiring on rent? In that case, it will be premises that means a capital good right? Cenvat credit on capital goods is also allowed but as per the definition of capital asset it does not include premises then how can we claim cenvat credit in that case?
01 August 2024
### **Cenvat Credit on Rent for Commercial Premises**
**1. Claiming Cenvat Credit on Rent:**
When you rent commercial premises and the landlord raises a bill with Service Tax, you are indeed eligible to claim Cenvat Credit on the service tax paid. This is because the rent for commercial premises is considered an input service under the Cenvat Credit Rules.
**Rules and Provisions:**
- **Cenvat Credit Rules, 2004 (as amended)**: Under Rule 2(l) of the Cenvat Credit Rules, 2004, "input service" includes services used in the course of business. This includes services related to the renting of immovable property for use in the course or furtherance of business.
- **Service Tax on Rent:** The service tax paid on the rent of commercial premises used for business purposes qualifies as an input service. Hence, you can claim the credit of service tax paid on rent.
- **Supporting Rule:**
- **Rule 3 of the Cenvat Credit Rules**: Allows for the credit of service tax paid on input services used in or in relation to the manufacture of final products or providing output service.
**2. Claiming Cenvat Credit on Capital Goods:**
If you purchase a commercial property (office building), the situation differs slightly:
- **Capital Goods Definition:** According to the Cenvat Credit Rules, "capital goods" are defined under Rule 2(a) of the Cenvat Credit Rules. However, the definition of capital goods does not include immovable property such as buildings.
- **No Credit on Purchase of Building:** As per the definition and provisions, Cenvat Credit is not available for the service tax paid on the purchase of immovable property like a building, since it does not fall under the category of "capital goods" as defined.
- **Rule Reference:**
- **Rule 2(a) of the Cenvat Credit Rules**: Defines "capital goods" and lists items eligible for credit. Immovable property like buildings is not included in this definition.
**Conclusion:**
1. **For Renting Premises:**
- You can claim Cenvat Credit on the service tax paid for renting commercial premises as it qualifies as an input service under Cenvat Credit Rules.
2. **For Buying Premises:**
- Cenvat Credit on service tax paid related to the purchase of immovable property such as buildings is not available, as buildings are not considered capital goods under the Cenvat Credit Rules.
**Key Supporting Documents:**
- **Cenvat Credit Rules, 2004:** For details on "input service" and eligible credits.
- **Service Tax Rules, 1994:** For specifics on the applicability of service tax on rent.
Always ensure to maintain proper documentation and comply with the latest amendments and notifications to correctly avail of the credit. For the most accurate and personalized advice, consulting with a tax professional or legal advisor is recommended.
**1. Claiming Cenvat Credit on Rent:**
When you rent commercial premises and the landlord raises a bill with Service Tax, you are indeed eligible to claim Cenvat Credit on the service tax paid. This is because the rent for commercial premises is considered an input service under the Cenvat Credit Rules.
**Rules and Provisions:**
- **Cenvat Credit Rules, 2004 (as amended)**: Under Rule 2(l) of the Cenvat Credit Rules, 2004, "input service" includes services used in the course of business. This includes services related to the renting of immovable property for use in the course or furtherance of business.
- **Service Tax on Rent:** The service tax paid on the rent of commercial premises used for business purposes qualifies as an input service. Hence, you can claim the credit of service tax paid on rent.
- **Supporting Rule:**
- **Rule 3 of the Cenvat Credit Rules**: Allows for the credit of service tax paid on input services used in or in relation to the manufacture of final products or providing output service.
**2. Claiming Cenvat Credit on Capital Goods:**
If you purchase a commercial property (office building), the situation differs slightly:
- **Capital Goods Definition:** According to the Cenvat Credit Rules, "capital goods" are defined under Rule 2(a) of the Cenvat Credit Rules. However, the definition of capital goods does not include immovable property such as buildings.
- **No Credit on Purchase of Building:** As per the definition and provisions, Cenvat Credit is not available for the service tax paid on the purchase of immovable property like a building, since it does not fall under the category of "capital goods" as defined.
- **Rule Reference:**
- **Rule 2(a) of the Cenvat Credit Rules**: Defines "capital goods" and lists items eligible for credit. Immovable property like buildings is not included in this definition.
**Conclusion:**
1. **For Renting Premises:**
- You can claim Cenvat Credit on the service tax paid for renting commercial premises as it qualifies as an input service under Cenvat Credit Rules.
2. **For Buying Premises:**
- Cenvat Credit on service tax paid related to the purchase of immovable property such as buildings is not available, as buildings are not considered capital goods under the Cenvat Credit Rules.
**Key Supporting Documents:**
- **Cenvat Credit Rules, 2004:** For details on "input service" and eligible credits.
- **Service Tax Rules, 1994:** For specifics on the applicability of service tax on rent.
Always ensure to maintain proper documentation and comply with the latest amendments and notifications to correctly avail of the credit. For the most accurate and personalized advice, consulting with a tax professional or legal advisor is recommended.
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