service tax credit eligibility-reg

[Ramakrishnan Seshadri]

Dear Sir,

We are receiving invoices from our service providers and others under rcm also by charging service tax. On receipt of the invoices we will book the invoice and payment will be made immediately or after one month. Our question is whether service tax credit charged in their invoices can be taken immediately or credit to be taken only after payment to the service providers.

Please clarify.

Thanks

S.Ramakrishnan

[Ganeshan Kalyani]

The service tax credit can be taken as soon as the invoice is received. Only condition given is that the payment of service amount to the supplier/service provider should be made within three months.

[Rajagopalan Ranganathan]

Sir,

Rule 4 (7) of CENVAT Credit rules, 2004 provides that the CENVAT credit in respect of input service shall be allowed, on or after the day on which the invoice, bill or, as the case may be, challan referred to in rule 9 is received.

However proviso to this rule provides that in respect of input service where whole or part of the service tax is liable to be paid by the recipient of service, credit of service tax payable by the service recipient shall be allowed after such service tax is paid.

The second proviso to the above rules provides 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 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, (except an amount equal to the CENVAT credit of the tax that is paid by the manufacturer or the service provider as recipient of 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

[Mahir S]

Yes sir, correctly explained..

AI Summary

Cenvat credit on input services: allowed on invoice receipt, but reverse charge and non payment trigger required reversal and reinstatement.
Cenvat credit for input services is allowed on or after receipt of the invoice, bill or challan. If the recipient is liable to pay service tax under reverse charge, credit in respect of that tax is allowed only after the service tax is paid by the recipient. If payment to the service provider (value and tax as per the invoice) is not made within three months of the invoice date, the recipient must pay an amount equal to the Cenvat credit availed on that input service (excluding credit equal to tax already paid under reverse charge); upon such payment the recipient may re avail the equivalent credit subject to other provisions.