CENVAT Credit on Work Contract service tax paid under Reverse Charge Mech.

[Rakesh K Paliwal]

Dear All,

I want suggestion on the above subject matter that , as we are paying service tax 50 percent on work contract service on various valuation like 40 percent , 70 percent and 60 percent of value of bills  under reverse charge, so can we take CENVAT on which category of payments agains after payments of ST.

Please advise, and give referance of that in rules/notification.

 

Regards

Rakesh K Paliwal

 

[sagarmal pareek]

Pl.refer CCR, 2004,  the relevant Rule 9,which prescribes for  documents for gtg CC.For yr share of 50 percent payment you may have to take the credit based on the challan for tax  payment.

For the other part that is the part which is to be borne by the Service provider after charging from you in the invoice,you may take the cr.on receipt of invoice itself,but in that case you must make him the payment of invoice within three months,otherwise you will have to return the CREDIT so obtained on the 91st day,then further u may takethe credit after making him the payment. Plrefer second Proviso after Rule 4(7) of the CCR, 2004 for this provision.as to how u can get credit in both cases that is payment by you and another for the portion in SP.s is invoice.

Rule 9(1)(e) is for challan evidncing payment of service tax ,by the service recipient as the person liableto pay service tax and rule 9(1)(f) is an invoice ,a bill or challan issued by a  provider of input service after 10th day of Sept. 2004. 

 

CA.SAGAR MAL PAREEK

[SUPRAKASH MITTRA]

But there are restriction in availment of cenvat credit in case of work contract for new construction i.e. where ST is leviable 40 percent value of the work....This has been a part of audit objection of the revenue dept...Kindly enlighten in this regard...

Regard

CA.   C.S. Chawla

[Rajesh Nathoo]

Dear mr.  Paliwal ,,

Cenvat credit on Work Contract Service is admissible only if  output service is Work Contract Service or Construction Service . Suppose a manufacturer is paying ST on work contract under reverse charge for civil work in his factory . This credit cannot be used to offset excise duty . But  a developer can very well take credit if allowed otherwise .

AI Summary

CENVAT credit on work contract services: credit on recipient's challan and invoice, subject to payment and use restrictions. CENVAT credit for service tax on work contract services paid under reverse charge is claimable on the challan for tax paid by the recipient; credit for the portion charged by the provider is claimable on receipt of the provider's invoice but must be reversed if the recipient fails to pay the invoice within three months (per the second proviso to Rule 4(7)); Rule 9(1)(e) and 9(1)(f) prescribe the challan and invoice/bill as supporting documents. Credit is admissible only where the output is Work Contract Service or Construction Service and cannot be used by a manufacturer to offset excise duty.