Reverse charge method
This query is : Resolved
Renjith.R.s.
(Querist)
03 July 2012
As per Notification 30/2012 under WCT ST liability of Service Receiver is 50%- Please Clarify following doubts
1.Liability of Service Receiver can adjust against his Input credit Claim or actual payment should make through challan?
2.He can claim input credit of the same against liability of that month itself?
Please help me to clear the same
1.Liability of Service Receiver can adjust against his Input credit Claim or actual payment should make through challan?
2.He can claim input credit of the same against liability of that month itself?
Please help me to clear the same
Renjith.R.s.
(Querist)
04 July 2012
Can any Expert can help me regarding above Query....
22 July 2025
Sure! Let me clarify your doubts regarding Reverse Charge Mechanism (RCM) liability under Notification 30/2012-ST related to Works Contract Tax (WCT).
Context:
Notification 30/2012-ST specifies that the Service Receiver is liable to pay 50% of Service Tax on certain works contract services under RCM.
Your questions:
1.
Can the service receiver adjust the 50% tax liability against Input Credit, or should actual payment be made through challan first?
The service receiver must pay the tax amount (the 50% liability under RCM) to the government.
This payment can be made through the prescribed challan.
However, if the service receiver has sufficient CENVAT credit available, he can use that credit to discharge the RCM liability instead of making a cash payment.
So, Input Credit can be utilized to pay RCM tax liability directly without making cash payment, provided credit is available.
2.
Can he claim input credit of the same tax paid under RCM against his liability for that month itself?
Yes, the tax paid under RCM by the service receiver is eligible for CENVAT credit.
This credit can be claimed in the same month or subsequent months, as per normal CENVAT credit rules.
In practice, the service receiver pays (or utilizes credit for) tax under RCM and simultaneously claims credit for the same amount — effectively neutralizing the tax cost, provided the input service is used for taxable output.
Summary:
Question Answer
Can RCM tax liability be paid using Input Credit? Yes, credit can be used to pay RCM liability directly.
Can Input Credit be claimed for tax paid under RCM immediately?
Context:
Notification 30/2012-ST specifies that the Service Receiver is liable to pay 50% of Service Tax on certain works contract services under RCM.
Your questions:
1.
Can the service receiver adjust the 50% tax liability against Input Credit, or should actual payment be made through challan first?
The service receiver must pay the tax amount (the 50% liability under RCM) to the government.
This payment can be made through the prescribed challan.
However, if the service receiver has sufficient CENVAT credit available, he can use that credit to discharge the RCM liability instead of making a cash payment.
So, Input Credit can be utilized to pay RCM tax liability directly without making cash payment, provided credit is available.
2.
Can he claim input credit of the same tax paid under RCM against his liability for that month itself?
Yes, the tax paid under RCM by the service receiver is eligible for CENVAT credit.
This credit can be claimed in the same month or subsequent months, as per normal CENVAT credit rules.
In practice, the service receiver pays (or utilizes credit for) tax under RCM and simultaneously claims credit for the same amount — effectively neutralizing the tax cost, provided the input service is used for taxable output.
Summary:
Question Answer
Can RCM tax liability be paid using Input Credit? Yes, credit can be used to pay RCM liability directly.
Can Input Credit be claimed for tax paid under RCM immediately?
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