REVERSAL OF SERVICE TAX PAID ON RCM BASIS

[MOHAN PANDEY]

Dear Sir

Our Company provide Freight & Forwarding & Transportation Service to the Various Customers

1. Company hire transporter form the market and paid Freight Charges to the Transporter and Paid the Service Tax - Reverse Charges Basis as per Service Tax law.

2. After deposit the service tax on above said GTA Services we will take the Credit on above said deposit tax on other services.

3. We are making separate invoice to recover the Freight charges - without collecting of Services because service tax paid by Customer as per RCM Basis).

Now Department Audit party want to Reversal of all such input tax credit taken by us ( e.i. All service tax paid on GTA Freight Charges paid by us ).

They are saying that this is not cover in output services.

Kindly Advise us Asap.

AI Summary

Reverse charge on GTA services can create deemed output service status allowing CENVAT credit utilisation subject to statutory conditions.
The issue is whether service tax paid on inward GTA services under the Reverse Charge mechanism can be availed and utilised as Cenvat Credit for other output services. Case law cited holds that payment of tax under reverse charge may render the GTA service a deemed output service, permitting credit utilisation; however, statutory amendments and the rule that credit for recipient liable service tax is allowable only after payment affect this position and expose such credits to audit reversal.