clarification regarding service tax credit on manpower service

[Guest]

dear sir,

we are manufacturer and taking man power service for labour work from contractor (proprietor).

contractor charges us labour charge and 25% service tax under partial reverse charge in his bill on monthly basis against providing man power service .

now our question is that when can we take credit of the same 25% service tax which was charged by contractor (1) immediately on received bill from contractor (2) on or after the payment made of the said bill ?

regards,

manan pandya

mo: 9510018659

[PAWAN KUMAR]

Dear Sir,

You can claim cenvat credit of service tax on or after the day on which payment is made of value of input service and service tax paid or payable as indicated in the invoice as per recent changes vide notification No.21/2014-C.E.(N.T.) Dated 11.07.2014 in rule 4(7) of Cenvat Credit Rules,2004.

[YAGAY andSUN]

Dear Manan,

We are in agreement with the reply submitted by Mr. Pawan against your query.

Regards

Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[LILUWENDRA CHATURVEDI]

Dear Mr. Pandya

There was provision to take credit after payment . But now as per new provision You may take credit as soon as you receive Bills/ Invoices based on the the same bill / invoices .

It does not matter when you are paying.

Regards

Chaturvedi

[YAGAY andSUN]

Dear All,

Please refer the 3rd Proviso of Rule 4 (7) of the CENVAT credit Rules, 2004 as amended from time to time which enumerates as follows:-

Provided also that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9, except in respect of input service where the whole of the service tax is liable to be paid by the recipient of service, is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service and in case the said payment is made, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules.

This is for your kind information.

Regards Team YAGAY and SUN

(Management and Indirect Tax Consultants)

[PAWAN KUMAR]

Dear Pandya Ji,

The matter is quite clear as per the following text in view of latest amendment by Notification No. 21/2014-CE (NT) Dated 11.07.2014;

You may take Cenvat credit immediately on receipt bills/invoices of those eligible services which is not under reverse charge subject to condition that payment of such bills should be done within three month. Further the services under full reverse charge, credit is allow after payment of service tax amount. Furthermore the services under partial reverse charge, Cenvat credit is allow also after payment of value of services and service tax payable.

[Ganeshan Kalyani]

The date of effect of Notification no.21/2014 dated 11th July, 2014 is 11th July, 2014. Also, in sub rule 1 and 7 of rule 4 proviso is inserted namely, “Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of any of the documents specified in sub- rule (1) of rule 9.” The said inserted proviso is with effective from 1st September, 2014.

AI Summary

Manufacturers can claim service tax credit on manpower services after invoice payment, within six months per Cenvat Credit Rules, 2004. A manufacturer inquired about when they can claim service tax credit on manpower services provided by a contractor, who charges a 25% service tax under partial reverse charge. Responses clarified that, according to recent amendments in the Cenvat Credit Rules, 2004, credit can be claimed on or after payment of the invoice, provided payment is made within three months. For services under full reverse charge, credit is allowed after payment of the service tax. An amendment effective from September 1, 2014, also restricts claiming Cenvat credit to within six months of the invoice date.