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Whether cenvat credit allowed??

SANJAY (CHARTERED ACCOUNTANTS) (943 Points)

29 April 2013

Dear Members,

Can we take Cenvat Credit in case of payment of Service tax on reverse charge?

As we are service receipient and pay the service tax as recipient on Reverse charges like Freight on transport of goods by road, Rent a cab and Security services? Now my question is can we take Cenvat Credit against the payment of Service Tax as we are only Service Recipient not Service Provider?

I want to take credit of Service tax amount which i paid on Telephone Expenses and Profession expenses?

Please clerify me?

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12 Replies

Manoj chopra (article) (128 Points)
Replied 29 April 2013

accrding to me u can take credit of amount deposited by you under reverse charge

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PARMITA MAZUMDER (CA- Practice) (386 Points)
Replied 29 April 2013

No, wef 01.07.2012 vide Notification 2/2012-CE(NT) dated 20.06.2012 an explaination has been inserted in sub rule (4) of Rule 3 whereby it has been clarified that "CENVAT credit cannot be utilised for payment of service tax in respect of services where by the person who is liable to pay service tax is service receipient ; The assesse has to pay such tax by utilizing cash not cenvat crdit becoz for him such service will remain input service and not as output service.

4 Like

T.Zameer (CA-Practise) (38 Points)
Replied 02 May 2013

Dear Parmita, it is not a question of whether cenvat credit can be utilised to pay service tax liability which arises as a result of reverse charges mechanism. It is actually a question of whether cenvat credit is allowable on service tax paid under reverse charge mechanism as a service recipient .

As long as the service tax amount pertains to input services, the amount so paid is allowed as input credit.

Input services is defined as follows.

Rule 2(l) of Cenvat Credit Rules (as effective from 1-4-2011), defines ‘input service’ as follows –

“Input service” means any service, -

(i) used by a provider of taxable service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,

and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legalservices, inward transportation of inputs or capital goods and outward transportation upto the place of removal;

PARMITA MAZUMDER (CA- Practice) (386 Points)
Replied 02 May 2013

Sir if you read the question above he is asking for whether he can take the cenvat crdit of telephone expenses against service tax liability under reverse charge. He is not providing any output service.

T.Zameer (CA-Practise) (38 Points)
Replied 02 May 2013

Service Tax paid on Telephone expenses and professional fee can be taken as input credit on qualifying as input serives but this input credit cannot be utilised for payment of Service tax liability which arises out of reverse charge mechanism..

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PARMITA MAZUMDER (CA- Practice) (386 Points)
Replied 02 May 2013

Yes dats what i wanted to say,,,

Manoj chopra (article) (128 Points)
Replied 04 May 2013

agreed, iam saying that we can take credit of amount paid under reverse charge . i misundersatnd the question

Ajay Kashyap (CA Final) (43 Points)
Replied 14 December 2014

not allowed, those services which are used for providing output service are only eligible for cenvat credit. simple logic is that if the above situation is broken, government will not get any service tax.

Manish K.Gandhi (Superintendent) (966 Points)
Replied 24 December 2014

I think the question is limited to extent whether he can take Credit of S.Tax paid for service as receipient and not how the same can be utilized. Possibly his company may be providing other output service or may be a manufacturer but this aspect is silent in the question.

The answer to limited question is yes, subject to definition of "Input Service" given at Rule 2(l) of Cenvat Credit Rules'2004 and initial Main/Inclusive part is already given by Sh. T.Zameer but without exclusion clause wherein some Service is specifically excluded, though the same service covered in Main or Inclusive part of the definition.

AKHIL P (Taxation) (79 Points)
Replied 13 January 2015

Adding...Central Government has amended the definition of ‘input service’ under Rule 2(l) of Cenvat Credit Rules, 2004 vide Notification No. 3/2011 – CE(NT) dated 01-03-2011 and again vide Notification No. 18/2012 – CE(NT) dated 17-03-2012 (w.e.f. 01-04-2012). The effect of the amendment is that rent-a-cab service has been specifically excluded from the definition of ‘input service’ and hence cenvat credit is generally not available as mentioned in question

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Ashok J (CA Final) (880 Points)
Replied 15 January 2015

Hi.

I hv limited practical knowledge in CENVAT. But my question is if there is no OUTPUT ST or EXCISE DUTY, where comes the question of claiming input cr? In such a case if you claim input either as rev charge or by payment in cash, does it mean govt will refund the money?

Manish K.Gandhi (Superintendent) (966 Points)
Replied 17 January 2015

If there is no OUTPUT ST or EXCISE DUTY, Input credit can not be availed. Only in case of finished product/output service is taxable but service tax not paid for the reason of export, input credit can be availed and accumulated credit can be refunded.