Reverse charge of service tax entry

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 May 2015 Dear Sir,
I am very confused so please help me.

i have AMC service recieved, wrongly i take full cenvat credit,

at the time i had paid the S.T 50% of cenvat value.

so please suggest me what is accounting treatment.
what i do next.

service provier give invoice show full service tax of invoice.

CA Anjana Grover

CA Anjana Grover (Expert)
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17 May 2015

Hi ,

If you have taken cenvat credit of full amount wrongly than you better reverse the input taken & deposit the same with govt as you always do along with interest @ 15% or 18% pa as applicable to you for delayed payment calculated on the basis of no of days.

Querist : Anonymous

Querist : Anonymous (Querist)

18 May 2015 thanks

Dear,

Please suggest me accounting treatment. Mean Entry in books.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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22 July 2025 Got it! You have a situation where:

You received AMC (Annual Maintenance Contract) service.

You paid Service Tax under Reverse Charge Mechanism (RCM) at 50% of the service value.

But you wrongly took CENVAT credit of full service tax amount.

The service provider's invoice shows full service tax.

What should you do next?
1. You need to reverse the excess CENVAT credit
Since you only paid 50% of service tax under RCM but took credit on 100%, you have claimed excess credit which is not allowed.

2. Accounting treatment:
You must:

Reverse the excess credit (i.e., the credit on the 50% service tax amount that you did NOT pay).

Deposit the reversed amount to the government with interest.

3. Journal entries
Assuming:

Total service tax on invoice = ₹100 (for example)

You paid 50% i.e. ₹50 under RCM.

But took credit on full ₹100.

(a) When you took the credit wrongly:
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Input Service Tax Credit A/c Dr. ₹100
To Service Tax Payable / Govt A/c ₹100
(b) When you realize excess credit (₹50) and reverse it:
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Service Tax Payable / Govt A/c Dr. ₹50
To Input Service Tax Credit A/c ₹50
(c) When you pay interest on excess credit (say ₹X):
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Interest Expense A/c Dr. ₹X
To Bank / Cash A/c ₹X
4. Other Notes
Ensure to file revised service tax returns or disclose the reversal as per rules.

Pay interest on the amount of excess credit from the date of taking credit till reversal.

Maintain proper documentation.

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