Reverse charge mechanism

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CA Radhika Pai (Querist)

20 March 2014 From whom does the service receiver recover service tax paid by him under reverse charge mechanism ? Since service provider under normal circumstances recovers service tax paid from service receiver... Thanks in advance...

CA. RAVIKUMAR

CA. RAVIKUMAR (Expert)

20 March 2014 Hi Radhika,

under normal circumstances service providers collects the service tax from service receiver and pays to government.

But in Reverse charge the service receiver himself pays to government.

No question of recovering from anyone, but service tax paid under RCM is eligible for CENVAT credit subject to Rule 2(L) Of CENVAT credit rule.

CA Radhika Pai

CA Radhika Pai (Querist)

21 March 2014 Thanks for your reply Sir, but what if service receiver does not have cenvat credit since it does not provide any services ?

Also, the service receiver cannot utilise cenvat credit received in excise as it manufactures exepmted goods(Correct me if I am wrong in this regard).

CA. RAVIKUMAR

CA. RAVIKUMAR (Expert)

21 March 2014 Hi Radhika,

If you are using the input service for providing exempted services or manufacturing exempted goods under excise , you are not eligible to claim input tax, hence The ST paid under RCM by you is a cost to company.

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