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Service tax credit on Bank Charges & Commission

CA. Rashi Goyal (Chartered Accountant) (512 Points)

20 March 2009

Hi,

One of our client, who is providing services, pays the service tax on Bank charges & commission but in the bank statement the charges are reflected inclusive of service tax. Service tax charges by the bank is not shown separately in the bank statement.

My query is whether input credit can be taken o it or not. And if taken than how to take credit on service tax paid on the bank charges.

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11 Replies

(Guest)

Yes He can take the Input credit on Bank Charges.

He has to collect Bank Advice for each transaction for commission/charges duly sign by bank authority and affix Bank stamp and also mention the break up of charges. Then this advice can use in cenvat credit

>> Rajesh

1 Like

pratik mehta (assistant manager) (26 Points)
Replied 12 May 2009

The CENVAT Credit of Service Tax paid on Bank Charges can be taken either by collecting transactionwise Bank Advise. Another way is that you have to ask the bank to furnish the Certificate along with statement showing the details of service tax on service charges collected by the bank from you. You can ask the certificate from bank either Quarterly / Half Yearly / Yearly. Such certificate and statement must be signed by any authorised person of the bank. You can avail CENVAT Credit of Service tax on the basis of the statement and certificate provided by the bank.

Generally, the banks will refuse to provide, but many companies are collecting such certificate issued by the banks and avail CENVAT Credit on such certificates.

manish kumar (Dy. Manager(Internal Audit)) (44 Points)
Replied 10 September 2009

There is no time limit for availing cenvat credit, but whether cenvat credit against the the bank charges which were already accounted as expenditure in previous years, can be taken now ? Whether it will not attract unjust enrichment? plz somebody help and clarify

pratik mehta (assistant manager) (26 Points)
Replied 11 September 2009

Originally posted by :manish kumar
"	There is no time limit for availing cenvat credit, but whether cenvat credit against the the bank charges which were already accounted as expenditure in previous years, can be taken nowÂ ? Whether it will not attract unjust enrichment? plz somebody help and clarify	"

pratik mehta (assistant manager) (26 Points)
Replied 11 September 2009

Dear Mr. Manish Kumar,

It is correct that there is no time limit for availing CENVAT Credit of service tax, but if such credit pertains to previous years and if you have accounted it as expenditure, you will not get the CENVAT Credit of service tax, becuase you cannot take dual benefit, viz. benefit of CENVAT Credit and benefit of Income tax. So first of all you have to check with your finance people, whether they have expensed out such credit pertains to previous year or not? But if it is shown in Service Tax Credit Receivable Account then you can avail CENVAT Credit pertaining to last year. Otherwise it is unjust enrichment, and according to this principle, any person cannot get the dual benefit.

Regards

PratiK Mehta.

manish kumar (Dy. Manager(Internal Audit)) (44 Points)
Replied 17 September 2009

what is the test for general input services eligible for cenvat credit? Say for instance, whether service tax paid for all bank charges are cenvatable even when it is incurred for output service e.g. charges for B.G. submitted to customs authorities for export purposes

p.veera Prasad (audit assistant) (30 Points)
Replied 13 March 2010

hi ,

we are software and hardware trading business, whether Purchase invoice in service tax input taken or not ,and when sale invoice in Service tax totally liable or service tax input can adjusted or not

please clarify.

Ganesh B (Accountant) (101 Points)
Replied 23 April 2014

Hi! Sirs,

Is there any time limit to utilize the credit, actually, for first half year (eST3) return we're not utilised to take the credit. Is it avail in the second half year and shown in the return and the balance amount (after utilizing in the credit part) to be kept as closing balance.

Kindly advice.