Cenvat credit & vces

This query is : Resolved 

Querist : Anonymous (Querist) 10 June 2013

1) A service provider has not paid service tax nor filed service tax return from last 5 years and want to settle his tax liability in VCES 2013 (condition of eligibility has been satisfied). Now on examination it is noticed that total output service tax liability is 5 lacs. Input service credit available (Not taken benefit in income tax) is Rs. 2 lacs. Whether he should file declaration only for 3 lacs in VCES and make payment for the same as there is bar in making payment from Cenvat credit in VCES. In case he makes declaration for entire 5 lacs in VCES he has to pay the same and would not eligible to take benefit of cenvat credit available of Rs. 2 lacs.

2) A service provider was having liability of output service tax in month of July (on the basis of advance received against service to be provided) for Rs. 5 lacs. He did not make payment of it. Then in month of Nov. he received input service according to which credit of input service is available to him at Rs. 2 lacs. This input service is used for providing output service for which payment is received in July. In Dec. the service was completed. He is to make payment of service tax. Whether he can take cenvat credit of Rs. 2 lacs (received in month of Nov.) against output service tax liability. Pl. note that as per POT the liability was of July but actually payment is being made in Dec.

CA Mahavir Shah (Expert)
11 June 2013

1. As per VCES you have to pay full service tax liability in CASH only. But there is no restriction on availing CENVAT credit. So you have to pay full Rs.5 Lac in cash but you can avail Rs.2 Lac CENVAT credit and utilize it for current or future liability.

2. No he can not avail credit of Input Service of Rs.2 Lac in July. He has to make full payment of service tax. But he can carry forward such Credit and utilize it in next payment.

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