Rcm provisions
This query is : Resolved
20 October 2014
Hi all,
My client has to pay RCM under Works contract and Supply of Man power. He is not paying the same to government. He has not paid to his vendor also. In his current assets he is showing input and in current liability he is showing his payable for more than 6 months.
1.As per ST provisions rule 3 comes to picture, now it has to be paid by Vendor only correct?
2.If he paid after 1-09-2014 can he avail the cenvat credit for the same.
please solve me with this.
My client has to pay RCM under Works contract and Supply of Man power. He is not paying the same to government. He has not paid to his vendor also. In his current assets he is showing input and in current liability he is showing his payable for more than 6 months.
1.As per ST provisions rule 3 comes to picture, now it has to be paid by Vendor only correct?
2.If he paid after 1-09-2014 can he avail the cenvat credit for the same.
please solve me with this.
21 October 2014
1)Service provider responsibility is fixed to his part of service tax.in future service receiver will be asked to pay tax which is not paid on RCM services.He also have to pay interest on the same
21 October 2014
Thanks for reply, can u please quote case law or provisions stating the same.
20 July 2025
Your Questions:
1. Whether after 1-09-2014, as per Rule 3 of Service Tax Rules, the liability to pay tax on RCM lies only with the vendor or the receiver?
Answer:
Under Rule 3 of Service Tax Rules, 1994, the responsibility to pay service tax under RCM lies with the service receiver for notified services (like Works Contract, Manpower Supply).
The service provider (vendor), if registered, has to pay service tax on his share (usually 50%), but the service receiver has to pay the tax on the remaining 50% under RCM.
If the service provider does not pay his part, the department can still recover that tax from the service provider.
However, if the service receiver does not pay his part under RCM, the department can recover the entire tax liability (including interest and penalty) from the service receiver.
So, both parties have their own liability, but under RCM, the receiver's liability is separate and cannot be waived just because the vendor didn't pay.
2. Can the client avail CENVAT Credit if payment of RCM tax is made after 1-09-2014?
Answer:
Yes, under CENVAT Credit Rules, 2004, credit on service tax paid under reverse charge can be availed only when the tax is actually paid to the government.
If the client delayed payment of RCM tax, they can still claim CENVAT credit but only from the date the tax is paid to the government.
If payment is made late (after 1-9-2014), credit can be claimed subject to no time limit prescribed for such services, but practically, it should be claimed in the same financial year or as per departmental discretion.
Relevant Provisions & Case Laws:
Rule 3 of Service Tax Rules, 1994: Explains who is liable to pay tax on RCM services (service receiver).
Section 73 & 75 of Finance Act, 1994: Talks about recovery of service tax from defaulters.
CENVAT Credit Rules, 2004 – Rule 4 & Rule 5: CENVAT credit eligibility and conditions, including payment of tax.
Case law:
CCE vs. Larsen & Toubro Ltd. (Supreme Court) clarified the liabilities under RCM.
Various tribunal rulings affirm that service receiver must discharge RCM tax liability and only after payment, credit is allowed.
1. Whether after 1-09-2014, as per Rule 3 of Service Tax Rules, the liability to pay tax on RCM lies only with the vendor or the receiver?
Answer:
Under Rule 3 of Service Tax Rules, 1994, the responsibility to pay service tax under RCM lies with the service receiver for notified services (like Works Contract, Manpower Supply).
The service provider (vendor), if registered, has to pay service tax on his share (usually 50%), but the service receiver has to pay the tax on the remaining 50% under RCM.
If the service provider does not pay his part, the department can still recover that tax from the service provider.
However, if the service receiver does not pay his part under RCM, the department can recover the entire tax liability (including interest and penalty) from the service receiver.
So, both parties have their own liability, but under RCM, the receiver's liability is separate and cannot be waived just because the vendor didn't pay.
2. Can the client avail CENVAT Credit if payment of RCM tax is made after 1-09-2014?
Answer:
Yes, under CENVAT Credit Rules, 2004, credit on service tax paid under reverse charge can be availed only when the tax is actually paid to the government.
If the client delayed payment of RCM tax, they can still claim CENVAT credit but only from the date the tax is paid to the government.
If payment is made late (after 1-9-2014), credit can be claimed subject to no time limit prescribed for such services, but practically, it should be claimed in the same financial year or as per departmental discretion.
Relevant Provisions & Case Laws:
Rule 3 of Service Tax Rules, 1994: Explains who is liable to pay tax on RCM services (service receiver).
Section 73 & 75 of Finance Act, 1994: Talks about recovery of service tax from defaulters.
CENVAT Credit Rules, 2004 – Rule 4 & Rule 5: CENVAT credit eligibility and conditions, including payment of tax.
Case law:
CCE vs. Larsen & Toubro Ltd. (Supreme Court) clarified the liabilities under RCM.
Various tribunal rulings affirm that service receiver must discharge RCM tax liability and only after payment, credit is allowed.
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