ST RCM and CENVAT CREDIT

[Bijay Shrestha]

A company has following liability as on 31.03.2016:

Service Tax Payable (Other than RCM) = ₹ 5,00,000/-

Service Tax payable on RCM = ₹ 2,00,000/-.

Both these liabilities not paid till date. Now the Company wants to pay but the Company wants to pay first RCM liability and take credit of that amount to pay ST Payable of ₹ 5,00,000/- and Rest pay in cash/bank.

Credit of RCM is available only after payment but that credit falls in next FY i.e. FY 2016-17.

Now whether the Company can do so?

In my view, the Company can't do so because liability falling in FY 2015-16 and credit available in FY 2016-17.

Both these payments have to be made by cash/bank including interests amount as appliacable.

Please suggest best way out.
 

AI Summary

Company Seeks to Offset Service Tax Liabilities Using RCM Credit; Interest Applies on Full Amounts Under Rule A company with outstanding service tax liabilities as of March 31, 2016, seeks to pay its Reverse Charge Mechanism (RCM) liability first and use the credit to offset its other service tax payable. The issue is whether this approach is permissible, given that the credit for RCM is available in the following fiscal year (2016-17). Participants in the discussion argue that while interest on delayed payments applies to both liabilities, credit can be utilized within one year from the tax payment date. The consensus is that interest must be paid on the full amounts of 5,00,000 and 2,00,000, respectively.