cenvat reverse charge

[satbir singhwahi]

limited company receiving bill for security services from partnership firm. As per reverse charge the company will pay 75% service tax and 25% will be charged by partnership firm in the bill.Whether cenvat can be availed by the company on this bill of security services .

Security is specifically covered in the inclusive part of the definition of Input Service hence credit of the same can be availed.

[YAGAY and SUN]

Dear Satbir,In addition to above reply, if such services are provided to residential colony or to such events which do not have any nexus with manufacturing business then CENVAT credit would not be available.RegardsYAGAYand SUN(Management, Businessand Indirect Tax Consultants)

[Ravi Kumar Somani]

Dear Mr. Satbir,

With regard to 75% service tax charged by the service provider, CENVAT credit can be taken based on the invoice as the payment will be made to the service provider. CENVAT credit can be taken once the invoice is received. Balance 25% service tax can be claimed as CENVAT credit only once the payment is made to the credit of Central Government by way of challan and also amount is paid to the vendor for the cost of services.

[satbir singhwahi]

Dear Ravi Ji

The service provider will charge 25 % in case of security services and receiver will pay 75 %.So i want to know whether credit of 25% and 75%(paid in cash ) both can be taken as credit for payment of Repair and maintenance service.

[Ravi Kumar Somani]

Dear Mr. Satbir,

Yes, CENVAT Credit for 25% portion can be taken on the date of receipt of Invoice and CENVAT credit of 75% can be taken after the payment in cash is made to the department and also payment is made to the service provider for the value of services.

[satbir singhwahi]

Thanks Ravi JI

​but I not able to understand the 75 % paid in cash has to be shown in st 3 as reverse charge under security services.

Again this 75 % can be taken as credit for Repair and maintence services.

[Ravi Kumar Somani]

Dear Mr. Satbir,

In case of reverse charge, liability arises once payment is made to the vendor. therefore, Output of 75% needs to be shown in ST 3 under security service as reverse charge in the month in which payment is made to the vendor. CENVAT credit can be taken in the month subsequent to the month in which payment is made to the department. Therefore, CENVAT credit will be shown in the immediate subsequent month in which payment is made to the department. Hope it resolves your query.

[satbir singhwahi]

Thanks Ravi Ji for reply

AI Summary

CENVAT credit on reverse charge: available for security services after government payment; provider charged portion creditable on invoice.
CENVAT credit is available on security services classified as input services, except where the services lack nexus with manufacturing or business (e.g., residential colony services). The provider charged portion is creditable on receipt of invoice. The recipient must record the reverse charge liability in ST 3 in the month payment is made to the vendor; credit for the reverse charge portion is claimable only after payment to the Central Government by challan and payment to the service provider, and may be taken in the subsequent month.