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Cenvat credit on feasability study service

Sasidhar Aruljothi (C.A FINAL) (187 Points)

16 March 2015

Guys,

The assessee company is in the business of renting properties for commercial purpose in Chennai. It intends to open another complex for the same purpose at a different place (Say Coimbatore). For this purpose it undertakes a feasibility study at Coimbatore @ 10,80,000 (including service tax). Can this service tax be claimed as input credit while discharging its liability?

The complex at the other place is to be constructed and then let out for commercial purpose. It appears that most probably the complex would be constructed and let out.

Now on the above grounds can the Service tax on this feasibility study be taken as input credit?

Thanks & Regards

Sashi

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2 Replies

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 16 March 2015

As per Rule 2(l) of Cenvat credit Rules,2004-

Input services includes the below mentioned services:

and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research....

Feasibilty studies are as good as such market research therefore the same is input service for which credit is expressively allowed by Cenvat Credit Rules,2004.

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Sasidhar Aruljothi (C.A FINAL) (187 Points)
Replied 16 March 2015

Thanks Saurabh. One more issues which i wanted to ask....the assessee company says that since the input service used at coimbatore is not related to the output renting service provided at chennai, Input credit may be denied......but since the output service provided at coimbatore will also.be renting this input can be claimed right?