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.
 

[Ganeshan Kalyani]

In my view, you can take the credit. The input service should have been used in relation to the service provided. The input service should have nexus with the output service provided.

[Ganeshan Kalyani]

The challan is the document based on which credit can be taken. It does not determine the eligibility of the credit. Thanks.

[Bijay Shrestha]

But Interest on full ST payable (Other than RCM ) has to be paid right??

[Rajagopalan Ranganathan]

Sir,

In respect service tax payable on RCM the date on which the service tax is paid into government Account is the relevant date to compute one year time limit. Therefore though the service tax is payable during 2015-16 it is paid by you in 2016-17 along with the due interest. Therefore you can take credit of service tax paid with one year from the date of deposit of the service tax into government Account. Such credit can be utilised for payment of service tax subsequently and there is no bar under Finance Act, 1994 and/or CENVAT Credit Rules, 2004.

[Ganeshan Kalyani]

Interest on delayed payment shall apply on both the liabilities I.e. RCM and other than RCM.

[Bijay Shrestha]

Correct.

What I mean is in case of RCM Liability - Interest on full ₹ 2 lakhs

Also in case of Other ST liability - Interest on full ₹ 5 Lakhs is payable.

It is not on ₹ 3 Lakhs (i.e. ₹ 5-2=3 Lakhs) Right??

[Ganeshan Kalyani]

Yes the interest is applicable on both the delayed payment.

Also please refer the reply submitted by Sri Rajagopalan Sir.

[Bijay Shrestha]

Agree sir.

But Interest on what amount??

[Ganeshan Kalyani]

Interest on outstanding amount.

[Bijay Shrestha]

sir, interest on both ₹ 5,00,000/- and 2,00,000/-

OR

On net payable of ₹ 3,00,000/- ???

AI Summary

RCM credit availability: tax deposited under reverse charge may be claimed as CENVAT credit when paid, subject to nexus and interest.
Tax paid under the reverse charge mechanism becomes eligible for CENVAT credit only after deposit and requires nexus with the output service; the challan evidences deposit but does not create entitlement. Statutory time limits for claiming credit run from the date of deposit. Interest for delayed payment applies separately to each outstanding liability, so interest is chargeable on the full delayed amounts until paid.