CBEC clarifies the issue of Cenvat Credit for the purpose of payment of Service on Renting of Immovable Property

CBEC has issued a master circular no. Circular No. 96/7/2007-ST dated the 23rd August, 2007 to clarify various issues.

Now this circular has been amended vide Circular No. 98/1/2008-ST dated 4/1/2008 to clarify more issues.

On of such issue was as under:

Whether cenvat credit of commercial or industrial construction service or works contract service used for construction of an immovable property, could be treated as input service for the output service namely renting of immovable property service under the CENVAT Credit Rules, 2004.

Now the CBEC clarified the issue as under:

Right to use immovable property is leviable to service tax under renting of immovable property service.

Commercial or industrial construction service or works contract service is an input service for the output namely immovable property. Immovable property is neither subjected to central excise duty nor to service tax.

Input credit of service tax can be taken only if the output is a 'service' liable to service tax or a 'goods' liable to excise duty. Since immovable property is neither 'service' or 'goods' as referred to above, input credit cannot be taken.