Vces - credit can be availed by service recipient ?

This query is : Resolved

Shruti Mishra (Querist)
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26 December 2013 Hi,
I have been unable to get clarity on the below mentioned issue :

1. Mr. A (eligible under VCES) has not collected any amount on account of Service tax from client from Oct 07 to Dec 12.

2. Now Mr. A is raising debit notes and collecting the ST now. Since the clients from whom ST has not been collected at all, obviously never took the cenvat credit of the same.

3. I am also clear that under VCES, Mr. A shall not be able to take any credit of Cenvat.

My qstn is can the Clients of Mr. A who are being charged Service Tax now, will THEY be able to Cenvat Credit now in this FY ????

If yes, will they (the clients) be eligible for taking the credit, & for current FY ? OR for the years against which the Service tax dues are being paid ???

Pls clarify. Thanks.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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26 December 2013 Yes the Clients of Mr. A who are being charged Service Tax now, THEY will be able to Cenvat Credit now in this FY ???? The clients will be eligible for taking the credit in current FY since debit note is being issued in current F. Y.

See also question 18 of FAQs on VCES
Q-18:
(a) Whether the tax dues amount paid under VCES would be eligible as CENVAT credit to the recipient of service under a supplementary invoice?
(b) Whether cenvat credit would be admissible to the person who pays tax dues under VCES as service recipient under reverse charge mechanism?
Rule 6(2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013, prescribes that CENVAT credit cannot be utilized for payment of "tax dues" under the Scheme. Except this condition, all issues relating to admissibility of CENVAT credit are to be determined in terms of the provisions of the Cenvat Credit Rules.
As regards admissibility of CENVAT credit in situations covered under part (a) and (b), attention is invited to rule 9(1)(bb) and 9(1)(e) respectively of the Cenvat Credit Rules.