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Advance given to service provider

Shivani (Learner) (1881 Points)

17 June 2015

Dear Friends

If a service receiver gives Rs. 10000 as advance to service provider for some service to be provided by service provider in future, then what will be the journal entry in the books of service receiver in this regard?

Can service receiver claim cenvat in respect of service tax component included in the advance given by him, at the time of giving advance?

Regards

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14 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 17 June 2015

As per rule 9 of CCR,

Cenvat credit can be taken based on the any of the following documents:
- Invoice
- Supplementary invoice
- Bill/challan
- Debit note/ credit note
If above docs does not contain full info, then if DC/AC is satisfied that the said goods have been accounted for in the books of the assessee he may allow cenvat credit

So u may have to wait till u receive invoice.

1 Like

Shivani (Learner) (1881 Points)
Replied 17 June 2015

Dear Poornima

But the service tax liability of service provider arises when he receives advance.

So you mean that service receiver will have to wait till invoice to get cenvat?

Regards

CMA Poornima Madhava (CMA) (13097 Points)
Replied 17 June 2015

Yeah because cenvat credit rules clearly specify on what basis the cenvat credit can be taken (as I have already mentioned). So in case of advance, what document is available from the specified list. None right? So u will have to wait till u receive invoice.

Shivani (Learner) (1881 Points)
Replied 17 June 2015

thank u so much

CA AnKiT BoHrA (AB) (Manager) (25955 Points)
Replied 17 June 2015

He needs to wait until the invoice...

Ramanuj (Accountant.) (834 Points)
Replied 17 June 2015

agree with above wait for Invoice.

Rony K J (CA Final student) (28 Points)
Replied 17 June 2015

Dear poornima

Can we take cenvat credit if we obtain credit note from service provider in the time of advance payment ?

CMA Poornima Madhava (CMA) (13097 Points)
Replied 17 June 2015

Yeah, as per provisions of the rules, it can be claimed but one has to consider the practicality of receiving such credit notes.

Shani Shankar (Chairman) (34 Points)
Replied 17 June 2015

Bohat lamba paragraph type karna padega muje better hai, amendments dekh lo @ Shivani

PS (Student) (32 Points)
Replied 18 June 2015

SP must issue invoice according to Rule 4A of STR

Rony K J (CA Final student) (28 Points)
Replied 18 June 2015

Thank you Poornima

for your prompt reply

JITENDRA SINGH (FINANCE EXECUTIVE) (21 Points)
Replied 18 June 2015

At bigning ( advance) no any jv reqr, this rqr at the time if final invoice submission

CA Kaivalya (Finance Professional) (31 Points)
Replied 20 June 2015

Bank receipt entry has to be recorded by debiting service provider for full amount of Rs 10,000.

Advance is paid on the basis of Customer Purchase order or Proforma invoice raised by service provider. Cenvat credit cannot be availed on the basis of such advance payment.

If the service has not been provided and the invoice has not been raised, then the service provider is also not liable to pay service tax.

Shivani (Learner) (1881 Points)
Replied 21 June 2015

Dear Kaivalya

I feel you are wrong in your last sentence.

If you read rule 3(b) of Point of Taxation Rules, if advance is received then liability of service provider will arise even if he hasnt issued invoice or rendered service as yet.

regards