CENVAT CREDIT ON RENT, Service Tax

[Rajeev Khulbe]

GOOD EVENING TO ALL EXPERTS,

I AM AGAIN HARE TO GET YOUR VALUABLE REPLY. EXPERTS OUR HEAD OFFICE IS SITUATED IN DELHI AND RENTED. WHICH RENT IS PER MONTH IS 1 LAKH. MY QUESTION IS THAT CAN WE TAKE CENVAT CREDIT OF SERVICE TAX IF BILL IN THE NAME OF BRANCH ( FACTORY)

Posts / Replies

[KASTURI SETHI]

Sh.Rajeev Khulbe Ji,

Can you prove that input service credit has been used in or in relation to the manufacture of dutiable final product in the factory ? It is basic requirement of Cenvat Credit Rules.

[surya narayana]

Dear Friend,

While agreeing with the views expressed by Shri. Kasturi Sethi Ji, I would like to say, if you have only one factory and the rent paid for maintaining the office related to the business pertaining to the goods manufactured, you may avail such credit.

If you have more factories, then ST paid on rent being the common credit , the same can be distributed proportionate to all factories based on the formula on the turnover basis prescribed under Rule 7 of CCR,2004 in the capacity of an Input service Distributor ( if you have not yet registered as ISD, you may have to get registered and then the common credit may be distributed)

Best Regards

Suryanarayana

[Rajeev Khulbe]

Thanks both sir for your valuable reply.sir we are excisable unit situated in Uttarakhand.our head office is situated in Delhi. Sir we have 3 branch situated in Uttarakhand. But sir rent bill in the name of only one company.

[KASTURI SETHI]

I fully endorse the views of Sh.Surya Narayana Sir. He has nicely explained without complete query. Sh.Khulbe's second query also stands answered by Sh.Surya Narayana, Sir.

[CS SANJAY MALHOTRA]

CENVAT 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. Immoveable property is neither good nor service..

Renting is an output service and hence no CENVAT Credit not allowed to manufacturing units. Renting service does not qualify any of the criteria in Input service definition in case of manufacturing units.

For e.g. CENVAT is allowed if one takes building on Rent and further sub-lets the same.

[Ganeshan Kalyani]

Sri Sanjay sir the querist is asking that if his head office is taken on rent and whether the service tax on the rent paid amount is cenvatable or not which in the address of one of his factory.

In my the querist need to check why the address is raised in the name of one of the factory. Normally it happens when the service availed is exclusively for that unit. The consultant normally raises the invoice is such manner. This aspect need to be checked. Further if the bill is in the address of the factory and the service is also for that company then in my view that invoice can be directly sent to that factory to avail the credit by the factory. Thanks.

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Sir, Pl. throw more light on the following points which emerge from your reply on this issue:-

1. W.e.f. 10.9.2004, cenvat credit has been allowed across the board. By this way has the Govt. not widened or liberalised the the scope of the term, "in or in relation to the manufacture of the product'.

2. Head Office is being used for business meetings in relation to the manufacture of the excisable goods and other administrative work in relation to pre-manufacturing stage and post-manufacturing stage.

3. If any manufacturer has got Centralised registration or registered as ISD, what would be the fate of the Service Tax paid under the category of "Renting of Immovable Property" for the building of Head Office ?

Undoubtedly, immovable property is neither goods nor service, but renting is service. Can we not relate renting to the term, 'in relation to manufacture' in view of above scenario ?

Sir, I am looking forward to your views for clearing the air and hence enrichment of my knowledge.

Thanks & Regards.

K.L.SETHI

[CS SANJAY MALHOTRA]

R/ Sh. Ganeshan ji / Sh. Kasturi ji,

Thanks for revert. I misunderstood the query. Agree with views of all experts.

R/Sh. Kasturi ji, your mail Point No 3 is very important and needs to be reviewed for CENVAT Credit. Reference can be made to judgement as per the attached link to share thoughts further..http://www.cbec.gov.in/resources//htdocs-servicetax/ecs-st/cenvat/2014-3-ecs-185.pdf

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Sir, With due respects, I want further express as under:

In view of liberalised Cenvat Credit Rules or facility, the geographical distance between the Head Office and its factory is relegated to the background for the purpose of availment of cenvat credit on input service subject to the other normal conditions. Do you agree Sir ? Eager to know your views.

[Ganeshan Kalyani]

Sir I agree that geographical location between Head office and Factory is a criteria for CCR.

[Rajeev Khulbe]

GREAT EXPERTS,

THANKS FOR YOUR REPLY BUT TELL ME THAT WHAT IS THE CONCLUSION OF YOUR ANSWER . IS OUR COMPANY LIABLE FOR TAKE CENVAT CREDIT ON SERVICE TAX ON RENT. H.O HAVE NOT ISD CERTIFICATE

[KASTURI SETHI]

Sh.Rajeev Khulbe ji,

You can take credit only if H.O. is registered as ISD. Registration has become mandatory w.e.f.1.4.12. Though there are case laws of CESTAT for allowing credit without registration of H.O.as ISD, yet I am of the view that if you take credit for the period prior to the date of registration as ISD, such credit is prone to litigation. No risk on the strength of invoices to be issued after the date of registration as ISD. It is clear from the judgement linked by Sh.CS Sanjay Malhotra, Sir. Sh.Surya Narayana, Sir and Sh.Ganeshan Kalyani, Sir have already expressed their views in your favour which are subject to registration of H.O. as ISD.

If you choose to opt for litigation for the period prior to registration, chances of the decision of the issue in your favour are 50 : 50.

[Rajeev Khulbe]

THANKS FOR YOUR VALUABLE REPLY,

BUT SIR IF RENT BILL WILL BE IN THE NAME OF ONE FACTORY THEN NO QUESTION WILL BE PUT ABOUT ISD . I THINK ISD WILL BE APPLICABLE WHEN RENT BILL IN THE NAME OF HEAD OFFICE AND HO WILL BIFURCATE THE BILL IN THE NAME OF DIFFERENT BRANCH. BUT SIR IN MY CASE RENT BILL CAME IN THE NAME OF FACTORY NOT HEAD OFFICE. THANKS SIR AND PLEASE CLEAR IF AM WRONG .

[KASTURI SETHI]

Dear Sir,

You want to take input service credit of 'Renting of Immovable Property Service' and That is Head Office.Rent is being paid on the building of head office and not factory. Why bill in the name of factory ? Why not in the name of Head Office ? I think Head Office is also your registered office with State Govt. ? Billing in the name of factory is also objectionable. Proper procedure is that bill should be in the name of Head Office and HO should be registered as ISD.

Situation has changed w.e.f.1.4.16 so pl. read Rule 7, 7A and Rule 2 (m) of Cenvat Credit Rules, 2004 and go accordingly.

 

[Randhir Kumar]

Dear Sir/Madam

Please confirm me we can take service tax input Rent paid other branch office yes/no, please suggest me