Reverse charge mechanism

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This query is : Resolved

divya barola (Querist)

30 August 2013 In the Case of reverse charge mechanism, if the assessee has received an invoice, say in February but has made the payment on 31st March,than the Service tax liability as per the Reverse charge mechanism rules will arise on 31st March only.
Also, the right to recognize the Service tax paid as an asset will arise only on date of payment of the tax to the department by the service recipient.
In such a case what will be the treatment if the service tax is paid after year end ie. 31st March.
As on balance sheet date there is a liability to pay but the right to claim cenvat credit does not exist.
So what will be the treatment in books of accounts??

CA Abhi Pandey

CA Abhi Pandey (Expert)

30 August 2013 It is right that input can be taken only after making the payment of Service Tax liability under Reverse Charge Mechanism.

If the same liability is paid say on 1st of April of the next F.Y. then on 31st march there would be "Service Tax Deferred Input" under the asset side and "Service Tax Payable under RCM" under liability side in the books of a/cs.

Same will be reversed on making payment on 1st of april.

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