Shivani (Learner) (1881 Points)
17 June 2015Dear Friends
If a service receiver gives Rs. 10000 as advance to service provider for some service to be provided by service provider in future, then what will be the journal entry in the books of service receiver in this regard?
Can service receiver claim cenvat in respect of service tax component included in the advance given by him, at the time of giving advance?
Regards
CMA Poornima Madhava
(CMA)
(13112 Points)
Replied 17 June 2015
As per rule 9 of CCR,
So u may have to wait till u receive invoice.
Shivani
(Learner)
(1881 Points)
Replied 17 June 2015
Dear Poornima
But the service tax liability of service provider arises when he receives advance.
So you mean that service receiver will have to wait till invoice to get cenvat?
Regards
CMA Poornima Madhava
(CMA)
(13112 Points)
Replied 17 June 2015
Yeah because cenvat credit rules clearly specify on what basis the cenvat credit can be taken (as I have already mentioned). So in case of advance, what document is available from the specified list. None right? So u will have to wait till u receive invoice.
CA AnKiT BoHrA (AB)
(Manager)
(25955 Points)
Replied 17 June 2015
He needs to wait until the invoice...
Rony K J
(CA Final student)
(28 Points)
Replied 17 June 2015
Dear poornima
Can we take cenvat credit if we obtain credit note from service provider in the time of advance payment ?
CMA Poornima Madhava
(CMA)
(13112 Points)
Replied 17 June 2015
Yeah, as per provisions of the rules, it can be claimed but one has to consider the practicality of receiving such credit notes.
Shani Shankar
(Chairman)
(34 Points)
Replied 17 June 2015
Rony K J
(CA Final student)
(28 Points)
Replied 18 June 2015
Thank you Poornima
for your prompt reply
JITENDRA SINGH
(FINANCE EXECUTIVE)
(21 Points)
Replied 18 June 2015
CA Kaivalya
(Finance Professional)
(31 Points)
Replied 20 June 2015
Bank receipt entry has to be recorded by debiting service provider for full amount of Rs 10,000.
Advance is paid on the basis of Customer Purchase order or Proforma invoice raised by service provider. Cenvat credit cannot be availed on the basis of such advance payment.
If the service has not been provided and the invoice has not been raised, then the service provider is also not liable to pay service tax.
Shivani
(Learner)
(1881 Points)
Replied 21 June 2015
Dear Kaivalya
I feel you are wrong in your last sentence.
If you read rule 3(b) of Point of Taxation Rules, if advance is received then liability of service provider will arise even if he hasnt issued invoice or rendered service as yet.
regards
CAclubindia
