Service tax credit rule

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Querist : Anonymous

Querist : Anonymous (Querist)

18 October 2013 Dear Sir,

Please guide me about is there any changes in service tax credit rule as earlier I was taking service tax credit on the basis of payment made to party. But now I heard about new rule that service tax credit can be taken on payment made or liability booked whichever is earlier. Please help me with notification for the same.

Regards,

Suresh Ramaswamy

Suresh Ramaswamy (Expert)

18 October 2013 The Point of Taxation Rules 2011 brought some changes in Service Tax w.e.f.01.04.2011. Upto 31st March 2011 since inception Service Tax was payable on receipt basis i.e. irrespective of the rendering of service and issuance of invoice the point of taxation was receipt of consideration either in advance or after billing.

When CENVAT Credit Rules were extended to Service Tax, the same concept of payment on cash basis was followed for claiming of input credit.

With effect from 01.04.2011 the point of taxation changed to the completion of service, billing date (if within 14 days of rendering service) or receipt of money whichever was earlier.

Initially there was no change for claiming of CENVAT credit, but subsequently CENVAT Credit Rules were amended to provide the availment of CENVAT Credit on receipt of the Input documents. However a condition was placed that in case the Input Service bill was not settled within 90 days, the CENVAT Credit availed (note availed not utilized) should be reversed and the amount thereof should be paid in cash alongwith interest.

I have therefore advised all my clients to continue claiming CENVAT Input Credit only on payment basis to avoid unnecessary hassles. The benefit would be available maybe a month or two later, but better safe than sorry.

Querist : Anonymous

Querist : Anonymous (Querist)

04 December 2013 Thank you so much for your valuable response.

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