Availing cenvat credit

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MOKSHESH (Querist)
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28 May 2014 If input services amounted Rs. 600000 are taken in providing output service amountd Rs. 1100000 in the 1st year then-

a) Should I take full credit of input service ? or
b) Should I take proportionate amount of service ?

CA.Rashmi Billore

CA.Rashmi Billore (Expert)
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28 May 2014 As per Cenvat credit rules, for Input services credit can be availed and used on receipt of Invoice.But if amount of services and service tax is not paid within 3 months of the date of invoice related input is required to be reverse.

Accordingly you can take full credit of input service in the year when you received invoice.FAnd there is no requirement to use the credit in proportion further one to one co relation is also not required

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MOKSHESH

MOKSHESH (Querist)
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28 May 2014 Can I get basic exemption of Rs. 10 lakhs to avail full amount of CENVAT credit i.e. Rs. 72000 only by paying service tax on Rs. 100000 i.e 12000 ?

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CA Nilesh P. Kanodia

CA Nilesh P. Kanodia (Expert)
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29 May 2014 Dear Mokshesh,

The amended Rule 4(7) of Cenvat Credit Rules 2004 provides that CENVAT credit on input services shall be available on receipt of invoice, bill or, as the case may be, challan referred to in Rule 9 raised on or after 1-4-2011 (except in cases of reverse charge) as long as the payment is made within three months from the date of the invoice.

However, if the payment is not made within 3 months the same would have to be reversed and will be re-available as credit whenever payments are being made.

In case of an "input service" where the Service tax is paid under reverse charge by the recipient of the service, the CENVAT credit shall be available only when payment is made of the value of input service.

An amendment is made in Rule 4(7) to provide that, CENVAT Credit in respect of an invoice, bill or challan referred in Rule 9 of CCR 04 which is issued
before 1-4-2011, shall be allowed on the day on which payment is made of the value of input service & Service tax there on.

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