Cenvat Credit on RCM Payments

[Mathurthi RamKumar]

Dear All,

Greetings for weekend... Kindly clarify me can we take cenvat credit on Reverse Charge Mecanisam payments?. Our company getting service from advocate and paying charges deducting TDS.(its around ₹ 1,00,000/- only) He is individual and no invoice for the service.

I want to now if we are liable to pay service tax how much % will be paid and eligible for cenvat credit or not? If eligible any invoice required for that?

Thanks in Advance.

Reg

M.RamKumar

[YAGAY andSUN]

Dear Mathurthi,

It is mandatory to issue of an Invoice under the Service Tax Rules,1994 as amended from time to time from a Service Provider to Service Recipient. Even if there is no invoice or bill for the service being provide, even then, you are liable to pay the service tax on Legal Service so provided under RCM.

You can avail CENVAT credit on the service tax so paid on such input services, after following the provisions as mentioned in the CENVAT credit Rules, 2004.

Regards,

SameerMalhotra- Consultant

YAGAY and SUN

Management, Business and Indirect Tax Consultants

[DR.MARIAPPAN GOVINDARAJAN]

The views of Pradeep is correct.

[Mahir S]

Yes sir, you have to pay service tax @ 12.36% on the total gross amount paid including TDS.

[satbir singhwahi]

U can take credit of service tax after deposit of tax, on the basis of challan deposited.

[Mathurthi RamKumar]

Dear All,

Thank you for valuable replys. But kindly confirm weather invoice is must or not. (or letterhead is ok?)

Regards

M.RamKumar

[Mahir S]

Rule 4A of Service Tax Rules, 1995 prescribes that the taxable services shall be provided and input credit shall be distributed only on the basis of a bill, invoice or challan. Such bill, invoice or challan will also include documents used by service providers of banking services (such as pay-in-slip, debit credit advice etc.) and consignment note issued by goods transport agencies.

These documents should disclose the required information about service provided or agreed to be provided, service provider and receiver of service.

Rule 4A prescribes that taxable services are to be provided or credit has to be distributed on invoice, bill or challan only. Such documents should be serially numbered and shall contain -

(i) name, address and registration number of service provider, if applicable.

(ii) name and address of service receiver,

(iii) description and value of taxable service, and

(iv) details of service tax payment/payable thereon.

Further, under full reverse charge mechanism, a service provider should note to also mention that the entire amount of Service Tax on the invoice is payable by the service recipient under reverse charge

Hope the above clarifies the issue.

[ABHIJIT BANERJEE]

For accounting and payment purpose a valid documents / Invoice is required,

For availing Service tax Credit, a Invoice issued under Rule 4A of Service Tax Rules, 1995 by the service provide is required, the same also prescribed U/r 9(1) of Cenvat Credit Rule 2004,

In case of present topic whether Service tax credit on RCM is admissible, we refer CCR 2 (l) define Input Services, CENVAT credit would be admissible if it has nexus with the out put service / Finished goods

If the legal service ( Advocate) is in relation with your business you may avail CENVAT,

Regarding RCM, in terms of Notification 30/2012-ST, dated 20th June, 2012, in certain service (other than company) the service received will deemed as service provider hence you require to pay the Service tax under RCM.

For availing CENVAT on so paid RCM you can avail on the basis of GAR7 ( Refer Rule 9 (1)CCR 2004

Hope the above satisfy your query, may revert if any doubt.

Regards,

Abhijit Banerjee

AI Summary

Reverse charge mechanism: recipient must pay service tax on legal services and may claim cenvat credit after payment. Reverse charge requires the service recipient to pay service tax on legal services received from individual advocates even without a provider invoice; a serially numbered bill, invoice or challan showing provider and recipient details, service description, value and tax payable is required. Cenvat credit on tax paid under reverse charge is allowable where the service is an input to the business and the necessary nexus and documentary evidence of tax payment (challan/GAR form) exist, with credit taken after deposit of tax in accordance with cenvat credit rules.