Pradeep Jain - Chartered Accountant

Query

(CA Hawan Kumar Pandey) Posted On: 17 Jul, 2012

R/Sir,as per latest notifiacation, can we avail Input tax credit ag. ST liability in respect of residential and commercial construction services on which we have taken exemption benefit 75%? (2)whether covered car parking and power backup charges is taxable under above said services?

1. Input Tax Credit As per the Serial No. 12 of Notification 26/2012 ST issued by the Central Board of Excise and Customs, the following abatement and their respective conditions are there for availing benefit of 75% abatement in case of “Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority”: Conditions: i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii)The value of land is included in the amount charged from the service receiver. It is clearly evident from the 12th point where it is said that cenvat credit is not allowed on the inputs used in construction of residential and commercial complexes when abatement of 75% has been already availed. But it does not say anything about the Cenvat credit of input services and the capital goods used in the same. So therefore it can be inferred from the above that Cenvat credit on input services and capital goods can be availed against the service tax liability. 2. Parking facility: The negative list exempts the following from service tax liability: “Services by way of vehicle parking to general public excluding leasing of space to an entity for providing such parking facility” Item no. 24 of notification 25/2012, dated 20.6.2012 provides exemption to service of parking of motor vehicles provided to general public. The term General public is defined in Serial No. (q) of para 2 of notification 25/2012-ST dated 20.6.2012 as follows: “‘general public’ means the body of people at large sufficiently defined by some common quality of public or impersonal nature” In the residential society, normally the parking area is allotted to individual members of the society and monthly charges are recovered from them. Such parking facility is not open to general public, but is limited to the members of the society. Similarly, in commercial buildings also, parking area is allotted to the members of the building. Such parking is not open to general public and hence exemption from payment of service tax will not be available to the society collecting the parking charges. Further, the amount of parking charges will be not be included in the amount of construction services. Therefore the parking charges will not be eligible for the abatement and service tax is chargeable @ 12.36%. 3. Power Back up Charges: The Guidance Note on Service Tax clarifies the point on distribution of electricity: Electricity transmission or distribution utility is exempt from service tax when the same is provided by: --- The Central Electricity Authority --- A State Electricity Board ---The Central Transmission Utility (CTU) ---A State Transmission Utility (STU) notified under the Electricity Act, 2003 (36 of 2003) ---A distribution or transmission licensee licensed under the said Act ---Any other entity entrusted with such function by the Central or State Government If charges are collected by a developer or a housing society for distribution of electricity within residential complexes then such services are not covered under this. The developer or the housing society would be covered under this entry only if it is entrusted with such function by the Central or a State government or if it is, for such distribution, a distribution licensee licensed under the Electricity Act, 2003. Therefore, the power back up charges is taxable to service tax @ 12.36%. The same will also not be included in the value of construction services to avail the abatement.

Comments

R/Sir,as per latest notifiacation, can we avail Input tax credit ag. ST liability in respect of residential and commercial construction services on which we have taken exemption benefit 75%? (2)whether covered car parking and power backup charges is taxable under above said services?

Query