CREDIT OF SERVICE TAX AGAINST THE CONSTRUCTION OF IMMOVABLE PROPERTY WHICH IS TO BE RENTED OUT–NOT ALLOWED - AMENDMENT TO CIR. NO. 96/7/2007-ST

Issue:- whether the credit of Service tax paid for various services used in the construction if immovable property, which is to be rented out in future, will be available against the payment of service tax on “Renting of Immovable Property” service.

Clarification:- As per CBEC, the credit cannot be taken as the services are used to construct immovable property. Which is neither subjected to Excise duty or service tax, and also Input credit of service tax can only be taken only if output is a service or goods liable to excise duty or service tax. Since the end product neither being a “service” nor “goods”, the credit shall not be available.

Editorial Remarks: - This clarification is open to challenge in the court as far fetched. If the objective of construction is renting, there is a clear cut case of input service