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Cenvat Credit Availment

Palash Gupta (Student...Hoping to pass Inter) (892 Points)

18 May 2011

Respected Sir,

We have client whose company is in process of construction, they will provide services only after completion of construction. But they have registered the company under Service tax just for availing input credit without having any present Output liability.

The respective expenses are capitalized but service tax part of expense is availed as cenvat credit.

Please advise whether the company can accumulate the input(Cenvat) credit for future output liability.Please advise with reference to any Section/Rule?

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6 Replies

CA Krishan Kumar Gupta (Business) (128 Points)
Replied 18 May 2011

in my opinion, you cannot avail cenvat credit because as it seems that the asset in question is not covered under the definition of Capital Goods as defined in Rule 2(a) of Cenvat Credit Rules,2004

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CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 18 May 2011

Capital goods used for construction of building do not qualify for cenvat credit . But machinery or similar assets to be used for providing taxable services are eligible for credit. Input services in connection with setting up was admissible till 31-03-2011. As per the amended definition effective from 01-04-2011this stands excluded from the scope of input services.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 20 May 2011

as the input services are construction related and it does not qualify as input service for output service of rent, so input credit is inadmissible

Alok Siddapur (Consultant) (229 Points)
Replied 20 May 2011

If the services can be classified as input services as per Rule 2, then as per rule 4(7) of CENVAT credit rules, CENVAT credit in respect of input service shall be allowed,on or after the day which payment is made of the value of input service and the service tax paid or payableas indicated in invoice.