'Input service' definition amended to exclude services having no nexus with manufacture or provision of service:

By DBB Sharma

THE eligibility of cenvat credit on certain input services like commercial construction, health insurance, life insurance etc used by a manufacturer or service provider is a subject matter of litigation which is increasing day by day with divergent views expressed by various appellate forums. Perhaps to avoid this litigation the ‘input service' definition has been amended in the budget, 2011(refer Notification No. 03/2011 Central Excise (NT) dt. 1.03.2011) by spefically excluding these services from the purview of input service. Even the services used for setting up of factory/office is now excluded.

The amended definition of input service excludes the following services from the ambit of input service for the purpose of admissibility of credit:

(A) Services specified in the following sub-clauses of clause 105 of Section 65 of Finance Act,1994

(p)- services provided by architect

(zn)- services provided by port

(zzl)- services provided by other port,

(zzm)- Service provided airport

(zzq)- commercial or industrial construction services,

(zzzh)- construction of complex service and

(zzzza)- works contract service

in so far as theyare used for-

(a) construction of a building or a civil structure or a part thereof; or

(b) laying of foundation or making of structures for support of capital goods,

except for the provision of one or more of the specified services; or

(B) the following Services specified in sub-clauses of clause (105) of section 65 of the

Finance Act,

(d)- general insurance service,

(o)- rent-a-cab service,

(zo)-authorised service station and

(zzzzj)- supply of tangible goods

in so far as they relate to a motor vehicle except when used for the provision of

taxable services for which the credit on motor vehicle is available as capital goods;

It specifically excludes services

(C) such as those provided in relation to outdoor catering, beauty treatment, health services,cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance,health insurance and travel benefits extended to employees on vacation such as Leave orHome Travel Concession, when such services are used primarily for personal use or consumption of any employee.

This amendment will come into force from 1.04.2011

Hope this will end litigation surrounding this aspect.