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Input credit of service tax

CA. B.ANAND (PROPRIETOR) (40 Points)

09 September 2016

An entity is covered under service tax provisions only from 01.04.2013 for is services. Can it avail Credit of service tax paid on rentals for the immediate previous year 2012-2013 in its accounts?

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10 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177934 Points)
Replied 09 September 2016

Not possible

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CA. B.ANAND (PROPRIETOR) (40 Points)
Replied 09 September 2016

Dhirajlal ji, Thanks for the reply. The query is need to refine it. The cenvat credit rules prior to 1.09.2014 state that any service tax paid on input services can be claimed without any time limit. Moreover in the present case, the land lord raised invoices with service tax on the immeditate preceding prevoius year and the same was paid without delay. In such a condition, whether there is any bar in taking credit of service tax paid. since these amount was not claimed as expenses in the profit and loss account too. Pls clarify

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177934 Points)
Replied 09 September 2016

As you are covered under the act from 01.04.2013, where the question arises about any credits before that period?

CA. B.ANAND (PROPRIETOR) (40 Points)
Replied 09 September 2016

Dhirajlalji I mean to say that i was an exempted service till then and became taxable service since 01.04.2013. Relying on the decision of Corromandel fertilizers vs cce (visakapatinam bench) can the Cenvat be taken. Thanks

Sunil Kumar (Indirect Taxation ) (1246 Points)
Replied 09 September 2016

Yes, there are certain verdicts of cestat.

But that not apply for exempted service.

Rule 6(1) and 6(2) specifically prohibits you to claim credit.

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CA. B.ANAND (PROPRIETOR) (40 Points)
Replied 10 September 2016

Thanks Sunil Kumarji,

I have finally narrowing down the query. As per Rule 6 (3) Explanation II, it states that any exempted service, the credit for service tax cannotbe availed. Contrarily, As stated in the Rule 3(3), which says when a output service provided ceases to be an exempted service provider, then he shall be eligible for the Cenvat credit as per the extended period. This view was also concurred by Dr Sanjeev Agarwal in one of his articles which reads as follows:

The amendment w.e.f. 1.3.2015 of allowing time limit of one year instead of six months shall make the
amendment made w.e.f. 1.9.2014 redundant because it would cover period of March to September 2014 also.
Further, those who could not claim Cenvat credit of invoices issued prior to September, 2014 can now do so as
the time limit has been raised from one month to one year. Thus, on all eligible invoices of last one year cenvat
credit be availed.
There are many instances where assessees receive input services but do not taken any registration as they are
not engaged in providing any taxable service during that period. In such cases, it may be advisable that the
assessee must take registration and file periodical returns wherein credit must be duly availed.

Pls clarify

Regards

Sunil Kumar (Indirect Taxation ) (1246 Points)
Replied 12 September 2016

Anand Ji,

But rule 3 (3) allows credits of Input and not Input service.

Furthermore, Notification No 33/2012 relating to SSP through para 2 clause ii) (iii) and (iv) which also allow credit of Inputs only.

So, if you are covered w.e.f 13-14 you need to satisfy the above notification condition.

To me, No credit can be taken except in respect of inputs lying in stock.

Please counter if I am wrong.

Sunil Kumar (Indirect Taxation ) (1246 Points)
Replied 12 September 2016

N/n says

" Credit can be taken on Input

Sunil Kumar (Indirect Taxation ) (1246 Points)
Replied 12 September 2016

And input services on or after the date on which service provider starts paying tax.

CA. B.ANAND (PROPRIETOR) (40 Points)
Replied 16 September 2016

Dear Sunil ji

Thanks for the reply and reference. I had taken the credit of inputs based on the interpretation by Dr. Sanjeev Agarwal in my books and now the ST Audit people are asking for reversal and consequently the payment along with the interest.

That is why the query was raised in this forum. I had quoted the write up he placed in the web regarding the availing the cenvat credit both on services or inputs even when the service provider is exempt under the Finance Act

Contradictory statements always lead to controversies

Regards