Provisions for availing Input credit, Service Tax

[K Balasubramanian]

We are rendering commercial and industrial construction services. Out of 10 contracts, in respect of 6 contracts service tax is paid on 100% value. In respect of 4 contracts, we avail 67% abatement (based on notification 01/2006). What are the restrictions on availing input credit from 01/03/2006?. Please explain in detail as to whether we should avail only the credits which are directly identifiable in respect of 6 contracts or we should avail input credit on a pro rata basis.

Posts / Replies

[Surender Gupta]

You have various options in Cenvat Credit either to avail 100% credit on cetain input services, or upto 20% of out put service tax. Which option is best option is to be determined on the basis of actual analyis of facts and circumstances.

[Madhukar N Hiregange]

for the 100% payment of service tax you are eligible for credits as under: Capital goods- used for provding taxable servcies. Once the same are used for taxable servcies the use of the same in my view for those where 67% exemption is availed SHOULD be available considering the intemtion of leigislature. However the Not1/2006 states that the exemption is not available if credit availed. This is defintie demand.Therefore on CG used commonly there would be a dispute. - Inputs - Those used for services where 100% tax paid would be available. The records for receipt for those projects as well as usage would have to be clear. - INput services - those used exclusively for 100% ST paid projects - those used for exempted projects not available. - those used commonly ( 16 enumrated - see Rule 6) -100% available - those used commonly ( other than 16 specified -only to extent used. Costing certificates may provide the break up b/w thsoe used for 100% ST paid and other. Though not asked please examien the possibility of using Not.12/2003 instead of 1/2006. You may find that is preferable.