Can we claim cenvat of service tax paid(rcm)

Queries 1164 views 3 replies

Valerian Dsouza

Manager Audit & Taxation

413 Points Joined August 2007

Client is Pvt Ltd Company, availed office renovation services from a Proprietory concern having VAT - work contract & Service Tax registration.

On bill, Service provider charged service tax/VAT as follows:

Net Bill 1,00,000/-

Material components 50,000/- VAT charged

Service Components 50,000/-

S.T. charged on 50% i.e. 25,000/- Rs.3090 ( service tax)

Client company paid the contractor for the bill amount including VAT & S.T. in October, 2012

Now, I presume, Client Company has to pay Rs.3090/- (RCM) before 6-11-2012

Question:

1. Can the Client Company claim Cenvat Credit of Rs.3090/- charged by Contractor & paid by the Company

to contractor, against their other tax liability before paying the S.T. on 6.11.2012

2. Can the Client Company claim CENVAT of Rs.3090/- (RCM) paid by them on 6-11-2012, if yes then when ?

Seeking kind advice .

Thank you so much

Valerian DSouza

Replies (3)

Pradeep Nainawati

ACA

496 Points Joined June 2009

Hi Valerin,

Client company have to pay Rs 3090 (RCM) in cash to government. RCM liability cant be discharged by utilising CENVAT. Client Company after payin in cash can take CENVAT of it

Client Company can take CENVAT Credit of ST paid to Service provider on 6/11/2012 if the same was paid to service provider along with bill amount before 31/10/2012.

Under Joint Charge Mechanism, the client company (receiver of service) can avail the CENVAT Credit charged by the Service Provider in his invoice as and when the company receives the invoice and also utilise the same to discharge service tax liabilities on other taxable services.

The liability of service tax arising by virtue of Section 68(2) of the Finance Act (i.e., RCM/ JCM) to the receiver cannot be discharged by utilising the available CENVAT credit. As pointed out by CA Pradeep Nainawati, it has to be paid by cash to the government. The client company can avail/ utilise the said tax only after making the payment of value of service along with the service tax to the service provider.