Service tax credit after the payment has been made

[Asked by Guest]

We are a pvt. ltd. Company giving CFA services from 2002. We had not paid service tax on reimbursement of expenses from our principal for period 2001 to Sep 2004 . This was revealed during service tax audit in Oct 04. Subsequently we paid the entire service tax amount with interest for the period 2001 to Sep 2004. While paying this arrears amount, We had availed service tax credit for service tax paid on telephone, security etc. for period May 2003 to Sept 2004 . Is it correct that such service tax credit can be availed only if payment of these bills have been done after Sept 2004 ?

[Madhukar N Hiregange]

In my view the reimbursements were not a subject amtter of servic etax till 19.4.2006 . Only after the ST determination of value rules are reimbursments liable. Secondly the credit is available for past periods as the tax is payable for past period.

AI Summary

Service tax credit can be claimed for past periods when arrears are paid after reassessment of reimbursement liability.
The document explains that reimbursements were not subject to service tax until the valuation/determination rules effective on 19.4.2006; consequently, liability for reimbursements arose only thereafter. When an assessee pays arrears with interest for past periods, input tax credit for services consumed in those past periods may be availed because the tax liability for those periods is being discharged.