Advance given to service provider

As per rule 9 of CCR,

• Cenvat credit can be taken based on the any of the following documents:
  • Invoice
  • Supplementary invoice
  • Bill/challan
  • Debit note/ credit note
• If above docs does not contain full info, then if DC/AC is satisfied that the said goods have been accounted for in the books of the assessee he may allow cenvat credit

So u may have to wait till u receive invoice.

Dear Poornima

But the service tax liability of service provider arises when he receives advance.

So you mean that service receiver will have to wait till invoice to get cenvat?

Regards

Yeah because cenvat credit rules clearly specify on what basis the cenvat credit can be taken (as I have already mentioned). So in case of advance, what document is available from the specified list. None right? So u will have to wait till u receive invoice.

thank u so much

He needs to wait until the invoice... 

agree with above wait for Invoice.

Dear poornima

Can we take cenvat credit if we obtain credit note from service provider in the time of advance payment ?

Yeah, as per provisions of the rules, it can be claimed but one has to consider the practicality of receiving such credit notes.

Thank you Poornima 

for your prompt reply

Bank receipt entry has to be recorded by debiting service provider for full amount of Rs 10,000.

Advance is paid on the basis of Customer Purchase order or Proforma invoice raised by service provider. Cenvat credit cannot be availed on the basis of such advance payment.

If the service has not been provided and the invoice has not been raised, then the service provider is also not liable to pay service tax.

Dear Kaivalya

I feel you are wrong in your last sentence.

If you read rule 3(b) of Point of Taxation Rules, if advance is received then liability of service provider will arise even if he hasnt issued invoice or rendered service as  yet.

regards