Vces scheme
This query is : Resolved
18 December 2013
If service provider has pay service tax under VCES Scheme for which service tax amount is received through party.Then party can take the benefit of CENVAT Credit or not which was not received by him earlier.
Please reply as soon as possible.
Please reply as soon as possible.
20 December 2013
yes the service receiver can take the credited, clarified by deptt in various conferences
21 December 2013
please give some references for above query.
03 August 2025
Your query relates to a very specific and critical issue under VCES 2013:
Can the service recipient take CENVAT credit of service tax paid by the service provider under the VCES scheme, where tax was earlier unpaid but payment was made through the recipient (party)?
✅ Short Answer:
Yes, CENVAT Credit can be taken, subject to conditions.
But let’s break it down with logic, rules, and available references.
🔍 Legal Framework:
📘 1. Rule 4(7) of CENVAT Credit Rules, 2004:
CENVAT credit on input services is allowed when:
The service tax is paid by the provider,
The receiver has a proper invoice, and
Payment is made to the provider within 3 months.
However, VCES created a unique situation: service tax was paid late, via VCES, and the recipient didn't take credit earlier.
📘 2. VCES Was Silent on CENVAT:
The Finance Act, 2013 (which introduced VCES) did not bar CENVAT credit on service tax paid under the scheme.
🗣️ Official Clarification (Department View):
There was no formal CBEC circular specifically addressing CENVAT credit under VCES. However:
✔️ CBEC FAQ on VCES (2013) – Point 15:
"The declarant (service provider) shall be entitled to issue invoice after making the payment under VCES... and the service recipient can take credit on the basis of such invoice subject to other conditions."
➡️ Interpretation: The recipient can claim credit of tax paid under VCES if:
A valid invoice is issued,
Payment is recorded properly,
Other CENVAT conditions are met.
✔️ Feedback from VCES Helpdesks / Conferences:
In many departmental workshops/conferences, officers clarified:
“Credit is available to service recipients if tax is paid under VCES and proper invoice is issued.”
📚 Reference Cases / Expert Opinions:
Taxmann Article (Dec 2013):
"CENVAT credit shall be allowed to service recipient if all conditions of CENVAT Credit Rules are fulfilled, even if the service tax was paid by the service provider under the VCES."
TIOL (TaxIndiaOnline) commentary:
“Denial of credit to service recipient would amount to taxing the same value twice – violating neutrality principle.”
✅ Conditions to Avail CENVAT Credit:
Ensure the following before availing credit:
Condition Status
Service tax was paid by provider under VCES ✅ Yes
You have received a valid invoice with service tax details ✅ Required
The service was actually received ✅ Required
Payment was made to provider ✅ Required
No double credit is claimed ✅ Ensure once only
❌ When CENVAT Credit May Not Be Allowed:
If invoice is not reissued or does not mention service tax separately.
If payment to provider was not made.
If service not used for output services/taxable activity.
If abuse/misuse of VCES is suspected.
✅ Conclusion:
Yes, CENVAT Credit can be claimed by the service recipient on tax paid by the service provider under VCES, if:
The invoice is valid,
Tax has been actually paid under the scheme,
Other CENVAT rules are followed.
📌 This is supported by CBEC FAQ, departmental conferences, and industry practice.
Can the service recipient take CENVAT credit of service tax paid by the service provider under the VCES scheme, where tax was earlier unpaid but payment was made through the recipient (party)?
✅ Short Answer:
Yes, CENVAT Credit can be taken, subject to conditions.
But let’s break it down with logic, rules, and available references.
🔍 Legal Framework:
📘 1. Rule 4(7) of CENVAT Credit Rules, 2004:
CENVAT credit on input services is allowed when:
The service tax is paid by the provider,
The receiver has a proper invoice, and
Payment is made to the provider within 3 months.
However, VCES created a unique situation: service tax was paid late, via VCES, and the recipient didn't take credit earlier.
📘 2. VCES Was Silent on CENVAT:
The Finance Act, 2013 (which introduced VCES) did not bar CENVAT credit on service tax paid under the scheme.
🗣️ Official Clarification (Department View):
There was no formal CBEC circular specifically addressing CENVAT credit under VCES. However:
✔️ CBEC FAQ on VCES (2013) – Point 15:
"The declarant (service provider) shall be entitled to issue invoice after making the payment under VCES... and the service recipient can take credit on the basis of such invoice subject to other conditions."
➡️ Interpretation: The recipient can claim credit of tax paid under VCES if:
A valid invoice is issued,
Payment is recorded properly,
Other CENVAT conditions are met.
✔️ Feedback from VCES Helpdesks / Conferences:
In many departmental workshops/conferences, officers clarified:
“Credit is available to service recipients if tax is paid under VCES and proper invoice is issued.”
📚 Reference Cases / Expert Opinions:
Taxmann Article (Dec 2013):
"CENVAT credit shall be allowed to service recipient if all conditions of CENVAT Credit Rules are fulfilled, even if the service tax was paid by the service provider under the VCES."
TIOL (TaxIndiaOnline) commentary:
“Denial of credit to service recipient would amount to taxing the same value twice – violating neutrality principle.”
✅ Conditions to Avail CENVAT Credit:
Ensure the following before availing credit:
Condition Status
Service tax was paid by provider under VCES ✅ Yes
You have received a valid invoice with service tax details ✅ Required
The service was actually received ✅ Required
Payment was made to provider ✅ Required
No double credit is claimed ✅ Ensure once only
❌ When CENVAT Credit May Not Be Allowed:
If invoice is not reissued or does not mention service tax separately.
If payment to provider was not made.
If service not used for output services/taxable activity.
If abuse/misuse of VCES is suspected.
✅ Conclusion:
Yes, CENVAT Credit can be claimed by the service recipient on tax paid by the service provider under VCES, if:
The invoice is valid,
Tax has been actually paid under the scheme,
Other CENVAT rules are followed.
📌 This is supported by CBEC FAQ, departmental conferences, and industry practice.
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