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Service tax credit

Vikash Agarwal (Student) (104 Points)

05 February 2013

Whether the service paid under reverse charge mechanism in a month can be taken as cenvat credit in the next month

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6 Replies

AMEER SHA (Learner) (203 Points)
Replied 05 February 2013

Vikas,

You can very well take the credit in next month...

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V.Rajalakshmi (proprietrix) (65 Points)
Replied 05 February 2013

Dear Vikas

I agree with Mr. Amir's sha, you can take a credit in the next month

CA Saravanakumar (Practice) (59 Points)
Replied 06 February 2013

Dear Vikas,

Service tax paid under reverse charge mecahnism can very well be taken as cenvat credit PROVIDED the transaction for which service tax is paid under reverse charge should be covered under the definition of Input services as per Cenvat Credit Rules. Say for example services such as taxi hire charges, works contract service in respect of civil construction can not be taken as cenvat credit though these are covered under reverse charge mechanism. In case of other services like legal charges paid to advocates or firm of advocates, supply of man power etc., can be taken as cenvat credit.

Cheers,

CA Saravanakumar. G

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 07 February 2013

CA Saravana has rightly observed that credit not available blindly. One aspect is whether one could make payment on the last day of the month so as to utilsie the same for payment of CE or ST. Thisis possible and would save working capital.

CA Saravanakumar (Practice) (59 Points)
Replied 07 February 2013

Dear Madhukar Sir,

Thanks for supplementing. You gave us wonderful tax planning measure for saving working capital. This is because Rule 4(7) of Cenvat Credit Rules permits the assessee to avail service tax credit on the day of payment of service tax under reverse charge mechanism.

Saravanakumar G