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

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.