Servicetax payment
This query is : Resolved
12 October 2015
Hi,
Last Year in FY 2014-15 we have rased invoices with Servicetax 12.36% and paid the Servicetax to Governmet.Now Party is asking us to revise the invoices With Tax 14%.They will pay invoice at new rate in FY 2015-16
Can We adjust or take Input credit(Old Invoices) of Servicetax 12.36% OR only 12% for Last year against 14% Servicetax payable.
Last Year in FY 2014-15 we have rased invoices with Servicetax 12.36% and paid the Servicetax to Governmet.Now Party is asking us to revise the invoices With Tax 14%.They will pay invoice at new rate in FY 2015-16
Can We adjust or take Input credit(Old Invoices) of Servicetax 12.36% OR only 12% for Last year against 14% Servicetax payable.
13 October 2015
Service tax cannot be charged at 14% on service provided in the previous year. Party may perhaps been asking for revising the invoice as there is time limit of one year for taking the credit and they may have missed to take the credit within this time period. Now they may be considering of taking credit based on your revised invoice.
That old tax charged can be adjusted against output liability under Rule 6 (3) of Service Tax Rules provided credit note is issued satisfying the condition of said rule.
That old tax charged can be adjusted against output liability under Rule 6 (3) of Service Tax Rules provided credit note is issued satisfying the condition of said rule.
13 October 2015
Dear Sir
Servicetax Invoice Cancelled of Fy 2014-15 in 2015-16 after May 2015.
Can we take Servicetax & Education @ 12.36 Credit while paying 14% Servicetax.
Only Servicetax 12% Credit is available and Can we take Ed. Cess & H.E.cess 3% Credit against 14% Payable Stax.
Servicetax Invoice Cancelled of Fy 2014-15 in 2015-16 after May 2015.
Can we take Servicetax & Education @ 12.36 Credit while paying 14% Servicetax.
Only Servicetax 12% Credit is available and Can we take Ed. Cess & H.E.cess 3% Credit against 14% Payable Stax.
25 July 2025
Hi,
Thanks for raising this complex but important issue regarding **Service Tax and CENVAT credit adjustments** during the **transition in tax rates** (from 12.36% to 14%) in **FY 2015-16**.
Let’s break it down step by step:
---
## 🔍 **Background Context:**
* In **FY 2014–15**, you raised invoices with **Service Tax @ 12.36%** (12% ST + 2% Ed. Cess + 1% SHE Cess), and paid this to the government.
* In **FY 2015–16 (after June 1, 2015)**, the **new rate became 14%**, and **Education Cess & SHE Cess were abolished**.
* Now, your client wants invoices **revised to 14%**, and will pay accordingly in FY 2015–16.
* You're asking:
1. Can you **take credit** of the old 12.36% (ST + Cesses) against 14% payable?
2. Can **Ed. Cess & SHE Cess** be used for adjusting liability under 14%?
---
## ✅ **Key Clarifications:**
### 1. **Old Service Tax Paid @12.36% in FY 2014–15:**
* **Service was already provided**, invoice raised, and tax paid at applicable rate at that time.
* **Revising invoice with 14%** for a service already rendered **is not legally valid**, as tax is determined based on **point of taxation rules (PoTR)**, i.e., when service was rendered and invoice issued.
* So, **you cannot charge 14%** retrospectively on a past transaction — doing so may expose you to audit objections.
---
### 2. **Use of Old CENVAT Credit (12% + Ed. Cess + SHE Cess):**
* Until **May 31, 2015**, you could avail and use **credit of Service Tax (12%) + Edu. Cess (2%) + SHE Cess (1%)**.
* From **June 1, 2015**, only **14% unified Service Tax** was payable, and **Edu. & SHE Cess were abolished**.
➡️ **Can you use old credit against new 14% tax?**
* **Only the 12% Service Tax portion** of the credit is usable.
* **Credit of Education Cess (2%) & SHE Cess (1%) is NOT allowed to be adjusted** against the new 14% liability after June 1, 2015.
---
## ⚠️ **Important Circulars & Rules:**
* **CBEC Circular No. 189/8/2015-Service Tax dated 26 November 2015** clearly states that **unutilized cess credit lapses** and **cannot be carried forward or used** against the new rate.
* Rule 3 of **CENVAT Credit Rules, 2004** was amended to **exclude Edu. Cess and SHE Cess** from admissible credits for services after the rate change.
---
## 🧾 **Invoicing Suggestion:**
* If the client missed claiming credit in time (1 year from invoice date under Rule 4(1) of CCR), they might be asking for a revised invoice so they can claim credit.
* However, legally, you **cannot revise old FY14-15 invoices just to match the 14% rate** of FY15-16 — unless the service itself was provided or deemed provided after the rate change.
---
## ✅ **Summary:**
| **Component** | **Available as Credit?** | **Adjustable Against 14%?** |
| ----------------- | ------------------------ | ---------------------------- |
| Service Tax @ 12% | ✅ Yes | ✅ Yes |
| Edu. Cess @ 2% | ✅ (Until May 2015 only) | ❌ Not allowed after Jun 2015 |
| SHE Cess @ 1% | ✅ (Until May 2015 only) | ❌ Not allowed after Jun 2015 |
---
## 📌 Recommendation:
* **Do not revise invoices** unless the service was actually rendered after June 1, 2015.
* Use only the **12% portion** of earlier CENVAT credit to pay your 14% liability.
* **Cess credit lapses** and cannot be utilized under the new regime.
---
Let me know if you’d like help drafting a response to the client explaining this position, or if you want references to CBEC circulars and rules.
Thanks for raising this complex but important issue regarding **Service Tax and CENVAT credit adjustments** during the **transition in tax rates** (from 12.36% to 14%) in **FY 2015-16**.
Let’s break it down step by step:
---
## 🔍 **Background Context:**
* In **FY 2014–15**, you raised invoices with **Service Tax @ 12.36%** (12% ST + 2% Ed. Cess + 1% SHE Cess), and paid this to the government.
* In **FY 2015–16 (after June 1, 2015)**, the **new rate became 14%**, and **Education Cess & SHE Cess were abolished**.
* Now, your client wants invoices **revised to 14%**, and will pay accordingly in FY 2015–16.
* You're asking:
1. Can you **take credit** of the old 12.36% (ST + Cesses) against 14% payable?
2. Can **Ed. Cess & SHE Cess** be used for adjusting liability under 14%?
---
## ✅ **Key Clarifications:**
### 1. **Old Service Tax Paid @12.36% in FY 2014–15:**
* **Service was already provided**, invoice raised, and tax paid at applicable rate at that time.
* **Revising invoice with 14%** for a service already rendered **is not legally valid**, as tax is determined based on **point of taxation rules (PoTR)**, i.e., when service was rendered and invoice issued.
* So, **you cannot charge 14%** retrospectively on a past transaction — doing so may expose you to audit objections.
---
### 2. **Use of Old CENVAT Credit (12% + Ed. Cess + SHE Cess):**
* Until **May 31, 2015**, you could avail and use **credit of Service Tax (12%) + Edu. Cess (2%) + SHE Cess (1%)**.
* From **June 1, 2015**, only **14% unified Service Tax** was payable, and **Edu. & SHE Cess were abolished**.
➡️ **Can you use old credit against new 14% tax?**
* **Only the 12% Service Tax portion** of the credit is usable.
* **Credit of Education Cess (2%) & SHE Cess (1%) is NOT allowed to be adjusted** against the new 14% liability after June 1, 2015.
---
## ⚠️ **Important Circulars & Rules:**
* **CBEC Circular No. 189/8/2015-Service Tax dated 26 November 2015** clearly states that **unutilized cess credit lapses** and **cannot be carried forward or used** against the new rate.
* Rule 3 of **CENVAT Credit Rules, 2004** was amended to **exclude Edu. Cess and SHE Cess** from admissible credits for services after the rate change.
---
## 🧾 **Invoicing Suggestion:**
* If the client missed claiming credit in time (1 year from invoice date under Rule 4(1) of CCR), they might be asking for a revised invoice so they can claim credit.
* However, legally, you **cannot revise old FY14-15 invoices just to match the 14% rate** of FY15-16 — unless the service itself was provided or deemed provided after the rate change.
---
## ✅ **Summary:**
| **Component** | **Available as Credit?** | **Adjustable Against 14%?** |
| ----------------- | ------------------------ | ---------------------------- |
| Service Tax @ 12% | ✅ Yes | ✅ Yes |
| Edu. Cess @ 2% | ✅ (Until May 2015 only) | ❌ Not allowed after Jun 2015 |
| SHE Cess @ 1% | ✅ (Until May 2015 only) | ❌ Not allowed after Jun 2015 |
---
## 📌 Recommendation:
* **Do not revise invoices** unless the service was actually rendered after June 1, 2015.
* Use only the **12% portion** of earlier CENVAT credit to pay your 14% liability.
* **Cess credit lapses** and cannot be utilized under the new regime.
---
Let me know if you’d like help drafting a response to the client explaining this position, or if you want references to CBEC circulars and rules.
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