Time limt for Cenvat credit under RCM

[Prudhvi Jakkula]

Dear experts,

Please solve my query.

Is it possible to claim credit of tax paid under RCM on input services received after one year of invoice date but immediately in the subsequent return after payment?

Please solve my query

[KASTURI SETHI]

Answer is NO. Section 18(2) and Section 16(4) of CGST Act, 2017 do not allow more than one year period from the date of invoice.No rule helps in this context.

[KASTURI SETHI]

It is further opined that Section 16 of the CGST Act does not differentiate between credit of tax charged by the supplier or credit of tax paid under RCM by the recipient. Only difference is that the recipient will avail credit after making payment of tax in cash to Govt.

[Prudhvi Jakkula]

Sir Thanks for your query

Is the same rule applicable under service tax also??

[KASTURI SETHI]

During pre-GST era, there was restriction of six months for availing cenvat credit and this restriction was extended to one year vide Notification No.06/15-CE(NT) dated 1.3.15.

[Prudhvi Jakkula]

Yes sir, But my doubt is whether that one year limit is applicable for RCM also??

[KASTURI SETHI]

Yes. One year sword was applicable for RCM also during pre-GST era for Service Tax Credit under RCM.

[KASTURI SETHI]

Dear Sh. Prudhvi Jakkula Ji,

Pl. peruse Section 68(2) of the Finance Act, 1994

SECTION [68.  Payment of service tax. - (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed.

(2) Notwithstanding anything contained in sub-section (1), in respect of [such taxable services as may be notified] by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service :]

In view of Section 68(2), it can be inferred that Service Recipient is deemed Service Provider and , therefore, Rule 4(7) of the Cenvat Credit Rules, 2004 imposing restriction of one year for availment of input service credit is also applicable for a person taking credit under RCM.

[Prudhvi Jakkula]

Thank your very much sir.

[DR.MARIAPPAN GOVINDARAJAN]

One year restriction is also applicable to RCM.

[rajkumar shukla]

Issue is not clear,after one year of invoice raised by GTA? Or after payment by cash in challan?

[Prudhvi Jakkula]

One year after self invoice raised by service recipient but not from Payment challan

[rajkumar shukla]

since third proviso to rule 4(1) of cenvat credit rules talks abt after one year of the date of issue of any documents specified in sub rule (1) of rule 9 and rule 9 specifies challan evidencing payment of service tax as document for taking credit in case of service recipients, I am of the view that it is one year from payment challan and not the date of invoice that would be starting time the for taking credit.

[KASTURI SETHI]

Dear Querist,

The following case law proves that under RCM Service Recipient is deemed service provider and the date of issuance of self invoice is to be considered.

2008 (11) S.T.R. 243 (Tri. - Del.) = 2008 (3) TMI 177 - CESTAT NEW DELHI PRAKASH INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., RAIPUR

[KASTURI SETHI]

Point of taxation is also relevant.

RULE [7. Determination of point of taxation in case of specified services or persons.- Notwithstanding anything [contained in rules 3, 4, or 8], the point of taxation in respect of the persons required to pay tax as recipients of service under the rules made in this regard in respect of services notified under sub-section (2) of section 68 of the Act, shall be the date on which payment is made :

[Provided that, where the payment is not made within a period of three months of the date of invoice, the point of taxation shall be determined the date immediately following the said period of three months

[rajkumar shukla]

In my view point of taxation is relevant only for payment of tax and not when credit should be taken.

The judgement quoted by Sri Kasturi sethi ji i refers to self invoice raised as a document for availing credit as payment was made through cenvat credit which is normally not allowed by the department.If the payment has been made in cash through challan , challan would be the document for taking credit. This judgement nowhere says that challan is not a document for availing credit as it was not an issue before it. so if challan is a document for taking credit, time limit should be reckoned from this date.

Experts may like to share their views .

[Prudhvi Jakkula]

rajkumar shukla Ji

Can you please provide any ruling or case laws supporting your view.

[KASTURI SETHI]

Dear experts,

We are discussing in a sportsman spirit. No element of ego is involved. Whatever we have discussed so far, the following points emerge:-

1. Service receiver under RCM is a deemed service provider.

2. Restriction of one year is applicable on service receiver under RCM.

3. Service recipient has to follow all the rules of Cenvat Credit Rules, 2004 as he is also service provider though deemed.

4. Self invoice makes the recipient eligible for availing credit under RCM Scheme.

5. Challan of deposit of ST in cash is mandatory as it also makes the recipient eligible for credit.

6. The date of invoice issued by the actual service provider is relevant to compute the period of one year inasmuch as that invoice is the basic document for availing credit. Self invoice and challan for deposit of ST in cash are conditions to qualify for availing credit on the strength of the invoice issued by the actual service provider.

 

[rajkumar shukla]

sir, but 3rd proviso to rule 4 says any of the documents specified sub rule 1 to rule 9 and not any invoice.

[Prudhvi Jakkula]

KASTURI SETHI Ji

What if Self invoice was not issued by service recipient and after one year he paid Service tax. I think in this case as the invoice was not issued by service recipient then one year will be applicable from Challan date.

Expecting your views.

[KASTURI SETHI]

Sh. Prudhvi Jakkula Ji,

The issue being debatable, only Court will decide.

AI Summary

Time limit for input tax credit under reverse charge may bar delayed claims; timing hinges on invoice, self invoice, or challan. The one year temporal restriction on availing input/service tax credit applies to recipients paying tax under the reverse charge mechanism because the recipient is deemed a provider; taking credit under RCM therefore requires compliance with standard documentary conditions (supplier invoice, self invoice where applicable, and challan evidencing cash deposit). A dispute exists whether the limitation period runs from the supplier's invoice or from the challan/self invoice date; point of taxation rules and tribunal authority supporting self invoice are invoked, but the matter is unsettled and may need judicial determination.