CENVAT CREDIT ON INPUT SERVICES UNDER 100% RCM

[Guest]

Dear sir

1. We are manufacturer of exempted goods under excise duty (yarn, fabric and madeups).

2. we are exporting only madeups to foreign countries, where we claim the duty drawback

3. we sold yarn and fabrics within the country. here we cannot claim the dutydrawback

my question is 'can we claim the cenvat credit on input RCM service for the goods

a) sold within the country

b) sold outside the country

[Himansu Sekhar]

Sir,

In my view you can avasil credit on RCM services for the the domestic clearancesd. But ad per policy circular no 9(re-2013)/2009-14 dated 30.10.13 of Dgft the credit on input services not allowed. RCM is included in that category. For exempted goods as per rule 6 of CCR 2004 no credit isd available as you will not pay any duty.

Thank you

[Guest]

Himansu Sha

Department is clear that, the manufacturer should not get double benefit of cenvat credit and dutydrawback,

it means if ED paid is taken as cenvat credit dutydrawback (provided on % of ED paid) will not be provided, visa a versa.

but my case was ST paid on GTA services under RCM, as Cenvat Credit on Input services is different from the above. it is not a double benifit.

i need to improve our disscussion

[Rajagopalan Ranganathan]

Sir,

If the final product is exempt then you cannot avail the credit of duty paid on inputs, capital goods and service tax paid on input services which are utilized for manufacture of the final product. In respect of final products exported you can claim the refund of credit of duty paid on inputs and service tax paid on input services through Customs, Central Excise and Service Tax Draw Back Rules, 1995.

[Rajagopalan Ranganathan]

Sir,

In continuation of my reply, you can claim the refund of credit of service tax paid by you under RCM as provided in rule 5 of Cenvat Credit Rules, 2004 since the GTA service is used for taking the export goods to the port of export which is 'place of removal' in your case.

[KASTURI SETHI]

I support the views of Sh.Ranganathan, Sir.

[Guest]

my reply to Rajagopalan Ranganathan sir,

1. I think, Cenvat Credit on input services under RCM is available to all business irrespective of manufacturers. so anybody, even a trader can claim CC under RCM. there is no question of manufacturing of exempted products.

2. under rule 5 refund of CC shall be allowed only to service provider not the service receipient, so no possible for refund.

[YAGAY andSUN]

Also check Notification No. 41/2012-ST as amended from time to time to avail the Service Tax Refund on the input services used beyond the place of removal.

AI Summary

Cenvat credit on reverse charge input services governed by end use; refund or drawback prevents double benefit. Cenvat credit on input services paid under the reverse charge mechanism may be availed for domestic clearances of taxable goods subject to Cenvat Credit Rules, but is not available where the final product is exempt; exporters should seek relief through refund or duty drawback mechanisms rather than claiming both cenvat credit and drawback, and entitlement to refund or drawback for RCM-paid services is governed by specific refund provisions and notifications.