eligibility of service tax credit

[Ramakrishnan Seshadri]

Dear Sir,

We had a doubt relating to the eligibility of service tax credit. We are the manufacturers of automobile parts.

We receive service tax paid invoices on services like manpower,clearing & forwarding and some other services. Our question is whether we can take service tax credit on receipt of the invoice and booked in the system or we have to wait till the payment is made for the invoices. we are still in confusion. some say only after payment service tax credit is eligible. Not at the time of booking the invoices .

Experts please clarify our doubt

Thanks & Regard,

S.Ramakrishnan

.

[MUKUND THAKKAR]

Rule 4provides conditions for availing CENVAT Credit. Rule 4(7)(as amended) imposes conditions on taking credit on input services.

According toRule 4(7)-

• 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 inRule 9is received;
• If the payment of the value of input services and the service payable as indicated in the invoice, 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 services, shall pay an amount equal to CENVAT credit availed on such input service except the service tax paid as recipient of service;
• In case the said payment is made after the reversal of CENVAT credit, the manufacturer or the service provider shall be entitled to take the credit of the same;
• The credit shall be allowed in respect of service tax paid on reverse charge mechanism only after the service tax is paid to the credit of the Central Government;
• If any amount is refunded towards an input service or a credit note is received by the manufacturer or service provider, who has taken credit on such input service, an amount equal to the CENVAT credit taken in respect of the amount is refunded or credit is to be reversed;
• The CENVAT credit in respect of invoice, bill or as the case may be, challan referred to inRule 9issued before 01.04.2011 shall be allowed on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in Rule 9;
• The manufacturer or provider of output service shall not take credit after one year (with effect from 01.03.2015) of the date of issue of any of the documents specified inRule 9(1).
• The amount mentioned in this rule, unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March;
• If the manufacturer of goods or the provider of output service fails to pay the amount payable under this rule, it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken;

[KASTURI SETHI]

Sh.Seshadri Ji,

Sh.Mukund Thakkar, Sir has cleared all the relevant points whether the assessee is providing forward service or receiving service under Reverse Charge Mechanism.

[Ganeshan Kalyani]

Sir, I endorse the views of Sri Mukund Ji. Thanks.

[CSSANJAY MALHOTRA]

Sh. Mukund ji,

Nicely explained...

AI Summary

Service tax credit: allowed on receipt of invoice but reversed if payment not made within prescribed period. CENVAT credit for input services is allowed on or after receipt of the invoice, bill or challan; if payment for the service and tax shown on the invoice is not made within the prescribed short period, the credit taken must be repaid (except tax paid as recipient), though it can be re availed if payment is subsequently made. Reverse charge service tax credit is allowable only after tax is paid to government. Refunds or credit notes necessitate reversal of corresponding CENVAT credit. A statutory time bar limits credit claiming after one year from the document date, and prescribed monthly timelines govern discharge and recovery of amounts under the rule.