Changes in Cenvat Credit Rules-Finance Act 2014

[Srivatsan Krishnamachari]

Dear Learned Friends,

Notification No;21/2014 dated 10/07/2014 specifies a time limit of six months for availing Cenvat credit for manufacturers and Service Providers.In case of Services wherein the service recipient has the responsibility to pay the entire tax under Reverse Charge mechanism such as legal consultancy services the Service Recipient can avail cenvat credit of the tax paid after the payment of tax is effected though the Service Recipient has not paid the Service Provider for the value of the service received. The only condition here, is the appropriate tax should have been paid unlike Partial Reverse Charge Mechanism where in not only the tax but also the value of the Service received should have been paid .My query is ; does this 'Six Months 'time limit applies to Service Recipient.

What will be the implication under 'Reverse Charge Mechanism if the Service Recipient pays only the tax in time and not the value of the Service received even after 'six months' of the Bill.If the Service Recipient under 'Partial Reverse Charge Mechanism' pays only the Tax first but pay the Service Provider only after six months for the value of the service received,can he still avail the Cenvat Credit after six months .Will he be penalized if he takes the Cenvat Credit.

Secondly is this change effective from 11/07/2014 or from 01/09/2014?Kindly clarify.

Thanks and With Regards,

K.Srivatsan

AI Summary

Clarification on six-month Cenvat credit limit under Reverse Charge; tax payment suffices, service value not required. A query was raised regarding the implications of the six-month time limit for availing Cenvat credit under the Reverse Charge Mechanism as per Notification No. 21/2014. The question focused on whether this time limit applies to service recipients who pay the tax but not the service value within six months. Responses clarified that under the Reverse Charge Mechanism, credit can be availed after paying the tax to the government, regardless of payment to the service provider. However, under Partial Reverse Charge, both tax and service value must be paid within six months to claim credit. The rule became effective on September 1, 2014.