Reverse Charge under service tax
This query is : Resolved
06 February 2010
As per the provisions of Service tax The input credit can be claimed only when the payment for the same has been made.
The company for which we are doing the audit deals in import of services and takes the credit at the time of booking output tax entries.They say that since the cashflows of the company are significantly affected if they deposit output service tax first and then claim for the refund since they do not have other output tax collections against which they can adjust the input for import of services.Moreover the exchequer(govt) do not stands at any loss through this provision.I want your advice whether the same can be a acceptable plea?
The company for which we are doing the audit deals in import of services and takes the credit at the time of booking output tax entries.They say that since the cashflows of the company are significantly affected if they deposit output service tax first and then claim for the refund since they do not have other output tax collections against which they can adjust the input for import of services.Moreover the exchequer(govt) do not stands at any loss through this provision.I want your advice whether the same can be a acceptable plea?
Madhukar N Hiregange
(Expert)
07 February 2010
Not in order. Credit can only be availed after pay6ment. Client could pay before the end of the month the tax on reverse charge so that it can use that credit for the services provided.
Liability would exist and interest and penalties would also apply if they continue assuming that they are actaully liable under 66A.
Liability would exist and interest and penalties would also apply if they continue assuming that they are actaully liable under 66A.
07 February 2010
But sir as i said in my query they do not have other significant output services against which they can take the input credit(if they pay under reverse charge) i.e they would have to claim refund in any case which will affect their cashflows to a large extent.The nature of the import of services is that of IT Support services?
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