Under new reverse charge mechanism, service tax is paid partly by service provider and partly service receiver.
For Example Manpower suply Agency is paid only 25 % and balance 75% is paid by the service receiver
My question here is we are eligible to take 100% tax credit or 75 % input credit?
in my knowledge under the reverse charge mechanism service tax input credit is allowed on challan payment basis
in challan we have paid only 75 %
The said provisions are yet to come into force. It is understood that entire credit shall be admissible
This provision come into force wef 28/05/2012
service receipent can avail 100 % credit of input i.e 25% as paid with bill amount and 75% as paid under reverse charge but point of service tax credit will be different.
you can avail 100% Credit
agree with MR Jha
| Parial Reverse Charge* | |||
| Case 1 | |||
| Where Service Tax has been charged fully in Invoice | |||
| Debit | Credit | ||
| Expense A/c | Dr | 100.00 | |
| Service Tax Input Credit A/c | Dr | 7.42 | |
| Service Tax Deferred Input A/c | Dr | 4.94 | |
| To Vendor A/c | Cr | 105.17 | |
| To TDS Payable A/c | Cr | 2.25 | |
| To Service Tax Payable A/c - under Reverse Charge | Cr | 4.94 | |
| 112.36 | 112.36 | ||
| Case 2 | |||
| Where Service Tax has not been charged in Invoice | |||
| Debit | Credit | ||
| Expense A/c | Dr | 100.00 | |
| Service Tax Deferred Input A/c | Dr | 12.36 | |
| To Vendor A/c | Cr | 97.75 | |
| To TDS Payable A/c | Cr | 2.25 | |
| To Service Tax Payable A/c - under Reverse Charge | Cr | 12.36 | |
| 112.36 | 112.36 | ||
| Case 3 | |||
| In case of Abatement (40%) | |||
| Debit | Credit | ||
| Expense A/c | Dr | 100.00 | |
| Service Tax Deferred Input A/c | Dr | 4.94 | |
| To Vendor A/c | Cr | 97.90 | |
| To TDS Payable A/c | Cr | 2.10 | |
| To Service Tax Payable A/c - under Reverse Charge | Cr | 4.94 | |
| 104.94 | 104.94 | ||
| * Illustrations in case of Vehicle Hiring (Ratio - 60:40) | |||
| Issue - Credit the "Service Tax Payable A/c - under Reverse Charge" while booking the invoice OR while payment to the Vendor | |||
entries in books of accounts can be made as above, in case of Vehicle Hiring,
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