Input service credit - Reg.

[vinay wakde]

We are receiving monetary consideration for following activities and we are paying service Tax under reverse charge method.

(1)Penalty imposed on supplier for late supply of material.

(2)Amount recovered from the contractor for delay or non completion of work beyond an agreed date.

(3)Amount recovered by the employer from employee for failure to comply with contracted conditions i.e. recovery of notice pay.

(4) Penalty and Fines collected by the company for maintenance of building & structures. 

Kindly let us know whether we shall claim CENVAT on above Input services received by us after making e-payment under reverse charge method.

Regards,

VINAY

[Madhukar N Hiregange]

Why you have to pay ST on reverse charge for penalty as that is not a consideration is not understood.

Compensation may however be liable. Under reverse charge only if liable.

AI Summary

Reverse charge service tax: CENVAT credit arises only where reverse charge liability exists; penalties generally not consideration.
Query whether CENVAT credit may be claimed for service tax paid under reverse charge on penalties, contractor delay recoveries, employee notice pay recoveries, and maintenance fines; respondent questioned treating penalties as consideration, observed penalties generally are not taxable, noted compensation may be taxable, and stated reverse charge (and resulting CENVAT eligibility) applies only where there is a valid liability to pay tax under reverse charge.