Urgent: cenvat credit on rental of immovable property

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Saurjya

CA FINAL STUDENT

52 Points Posted on 19 February 2012

One of our clients, a multinational manufacturing concern is having a regional office in Kolkata. It's manufacturing plants are located in Western and Northern India. It is paying service tax to the landlord of the regional office in Kolkata.

Please let me know at the earliest if it would be possible for them to claim CENVAT CREDIT on Input Service??? As per the opinion of one of their finance executive, they cannot claim CENVAT CREDIT since they are not using the regional office for manufacturing. It is just an administrative office. In my opinion they can claim CENVAT CREDIT as Rule 2(1) of the CENVAT CREDIT RULES, 2004 "Input Service" means any service-

(ii) used y any manufacturer, whether directly or indirectly, in or in relation to the-

- manufacture of final products

-clearance of final products upto the place of removal

and includes service in relation to-

advertisement or sales promotion, market research, accounting, financing, share registry, legal services, etc."

The above text is an abridged version.

Kindly reply as soon as possible as a pending issue has to be sorted out at the earliest.

Thanks in advance.

Replies (4)

jogendra

DGM-Commercial

115 Points Posted on 20 February 2012

(l)	"input service" means any service,-
	(i)	used by a provider of taxable service for providing an output service; or
	(ii)	used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final productsupto the place of removal,
	and includes services used in relation to setting up, modernization, 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, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

vide notification No.3/2011-CE dtd.01.03.2011 CBE & C has changed the definition of input services and ommitted the word "setting up"..

Hence your client can not claim the service tax paid, under "rent of immoveable property services" of office building, as input credit as under Cenvat Credit Rules, 2004.

jogendra

DGM-Commercial

115 Points Posted on 20 February 2012

vide notification No.3/2011-CE dtd.01.03.2011 CBE & C has changed the definition of input services and ommitted the word "setting up"..

Hence your client can not claim the service tax paid, under "rent of immoveable property services" of office building, as input credit as under Cenvat Credit Rules, 2004.

Mallikharjun

Deputy Manager

354 Points Posted on 20 February 2012

First of all, your regional office shall be registered under "Input service distributor". If you are able to correlate the activities happening in your regional office either to manufacture or clearance of finished goods, you are eligible to take credit.