Works contracts services

This query is : Resolved

CA Sanjay Baheti (Querist)
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24 April 2014 One of my client being a Pvt Ltd Co.covered under Works Contracts Services.So as per RCM the company is 100% liable for making ST payment after claiming abatement by virtue of ST notification 24/2012 i.e. 7.416%/4.944% as Service tax rate, as the case may be.

Moreover the company is also liable 50% of ST liability as service receiver for the input services from Service tax provider.

Now query is whether 50 % portion of ST liability paid as service receiver can be set off against its liability for output services as service provider or not.

Please reply soon.

Sandeep Mangal Agarwal

Sandeep Mangal Agarwal (Expert)
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24 April 2014 Dear Sanjay ,

As per extract definition of Input service as specified in Rule 2(I) of Cenvat Credit Rules , 2004

Following services have been specifically excluded from definition of ‘Input Services’, if they are used for construction of a building or a civil structure or a part thereof, or laying of foundation or making of structures for support of capital goods The aforesaid services are termed as ‘specified services’ for purpose of this sub-clause] –

* Architect Services [Section 65(105)(p)]

* Port Services [Section 65(105)(zn)]

* Other Port Services [Section 65(105)(zzl)]

* Airport Services [Section 65(105)(zzm)]

* Commercial or Industrial Construction [Section 65(105)(zzq)]

* Construction of Residential Complex [Section 65(105)(zzzh)]

* Works Contract Service [Section 65(105)(zzzza)]

BUT HOWEVER These ‘specified services’ will be eligible for Cenvat credit only if used for any of these ‘Specified Services’. e.g. Architect Service will be eligible as input service if used for Port Service or Construction Service or Works Contract Service.

THEREFORE, IN YOUR CASE AS YOU ARE RECEIVING AND ALSO PROVIDING SPECIFIED SERVICE I.E; " WORKS CONTRACT SERVICE" WHICH IS INPUT SERVICE AS PER DEFINITION ABOVE. SO YOU ARE ELIGIBLE TO TAKE CENVAT CREDIT OF THE AMOUNT PAID TO SERVICE PROVIDER AS SERVICE RECEIVER. BUT YOU ARE ELIGIBLE ON 50 % OF PORTION ONLY ON THE BASIS OF GAR-7 AND PAYMENT MADE AFTER SERVICE PROVIDER OF HIS AMOUNT DUE AGAINST SERVICE PROVIDED BY HIM TO YOUR COMPANY.AND ON REST 50 % YOU CAN TAKE CENVAT CREDIT ON THE BASIS OF INVOICE RECEIVED BY YOU FROM SERVICE PROVIDER (GENERAL PROVISION).

THEREFORE,YOU CAN TAKE CREDIT BUT THIS AREA IS NOT FREE FROM DOUBT AND ULTIMATE RESULT IS UNCERTAIN.

Thanks,