Credit on payment of service tax under reverse charge

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 September 2013 I have doubt regarding claiming of Input Credit paid under Service Tax Reverse Charge Mechanism.

I have recd. invoice of Rs. 100000/- from the service tax provider under works contract on 10t August, 2012, in which I have to pay service tax @ 50% of the service valued i.e. is (6.18%) Rs.6180/- at the time of payment to the service provider. I have made the payment on 15th October, 2012 so my liability to pay service tax on reverse charge arises in the month of October, 2012. But I have paid the Service tax under reverse charge on the month of 10th February, 2013 with Interest on delay of Payment for 4 months.

Now can you suggest when I can take credit of Service tax paid on Reverse Charge.
1. Whether in the month of October, 2012, where my liability arises & I have the paid the tax with Interest. Or
2. In the Month of February, 2013 in which I have paid the Actual Tax.

Kindly help me out as soon as Possible.

Ram Avtar Singh

Ram Avtar Singh (Expert)
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13 September 2013 service tax credit can take after payment of service tax.

a) When the substantive law i.e. section 67 of the Finance Act, 1994 treats such book adjustments etc., as deemed payment, there is no reason for denying such extended meaning to the word ‘payment’ for availment of credit. As far as the provisions of Rule 4 (7) are concerned, it only provides that the CENVAT credit shall be allowed, on or after the date on which payment is made of the value of the input service and of service tax. The form of payment is not indicated in the same and the rule does not place restriction on payment through debit in the books of accounts. Therefore, if the service charges as well as the service tax have been paid in any prescribed manner which is entitled to be called ‘gross amount charged’ then credit should be allowed under said rule 4 (7). Thus, in the case of “Associate Enterprises”, credit of service tax can be availed of when the payment has been made to the service provider in terms of section 67 (4) (c) of Finance Act, 1994 and the service tax has been paid to the Government Account.

(b) In the cases where the receiver of service reduces the amount mentioned in the invoice/bill/challan and makes discounted payment, then it should be taken as final payment towards the provision of service. The mere fact that finally settled amount is less than the amount shown in the invoice does not alter the fact that service charges have been paid and thus the service receiver is entitled to take credit provided he has also paid the amount of service tax, (whether proportionately reduced or the original amount) to the service provider. The invoice would in fact stand amended to that extent. The credit taken would be equivalent to the amount that is paid as service tax. However, in case of subsequent refund or extra payment of service tax, the credit would also be altered accordingly.

6. The contents of this circular may be suitably brought to the notice of the field formations. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned.

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Querist : Anonymous

Querist : Anonymous (Querist)

13 September 2013 Dear Sir,

Can u suggest the Specific Period in Which, I take the Credit, Whether in October-12 when my Liability arise of which I paid the Service tax in the Month of Feb-13 or

In the Month of Feb-13 were I paid the Service Tax Amount.

Kindly suggest the Month. Please.

Awaiting for your reply

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Querist : Anonymous

Querist : Anonymous (Querist)

Querist : Anonymous

Querist : Anonymous (Querist)

Querist : Anonymous

Querist : Anonymous (Querist)

Ram Avtar Singh

Ram Avtar Singh (Expert)
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14 September 2013 you have paid in march 13 then you cant take cenvat credit in march 13

Querist : Anonymous

Querist : Anonymous (Querist)

17 September 2013 Dear Sir,

But the Tax is due in the Month of October-2013 for which I have paid the Interest from Oct-12 to Feb-13 due to default in Payment. In that case whether we can claim in the Month of October-12. As I have the Interest from the Month of the Tax is due.

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Ram Avtar Singh

Ram Avtar Singh (Expert)
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18 September 2013 as per law No. and interest paid is not cenvatable.if you have taken wrongly reversed it. othewise you will face unlawfull act.