Service tax input credit under new reverse charge mechanism

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Deepak Tanwar

CA- INTER

73 Points Posted on 05 June 2012

Under new reverse charge mechanism, service tax is paid partly by service provider and partly service receiver.

For Example Manpower suply Agency is paid only 25 % and balance 75% is paid by the service receiver

My question here is we are eligible to take 100% tax credit or 75 % input credit?

in my knowledge under the reverse charge mechanism service tax input credit is allowed on challan payment basis

in challan we have paid only 75 %

Replies (6)

Dayal

Gen. Manager - Indirect Taxation

3190 Points Posted on 05 June 2012

The said provisions are yet to come into force. It is understood that entire credit shall be admissible

Deepak Tanwar

CA- INTER

73 Points Posted on 05 June 2012

This provision come into force wef 28/05/2012

CA Ankit Jha

Manager - Accounts & Finance

44 Points Posted on 03 August 2012

service receipent can avail 100 % credit of input i.e 25% as paid with bill amount and 75% as paid under reverse charge but point of service tax credit will be different.

Prasad

Sr. Manager

625 Points Posted on 03 August 2012

you can avail 100% Credit

SACHIN KOLI

Accountant

40 Points Posted on 28 August 2012

agree with MR Jha

CA Ankit Jha

Manager - Accounts & Finance

44 Points Posted on 29 August 2012

Parial Reverse Charge*

Case 1
Where Service Tax has been charged fully in Invoice
		Debit	Credit
Expense A/c	Dr	100.00
Service Tax Input Credit A/c	Dr	7.42
Service Tax Deferred Input A/c	Dr	4.94
To Vendor A/c	Cr		105.17
To TDS Payable A/c	Cr		2.25
To Service Tax Payable A/c - under Reverse Charge	Cr		4.94
		112.36	112.36

Case 2
Where Service Tax has not been charged in Invoice
		Debit	Credit
Expense A/c	Dr	100.00
Service Tax Deferred Input A/c	Dr	12.36
To Vendor A/c	Cr		97.75
To TDS Payable A/c	Cr		2.25
To Service Tax Payable A/c - under Reverse Charge	Cr		12.36
		112.36	112.36

Case 3
In case of Abatement (40%)
		Debit	Credit
Expense A/c	Dr	100.00
Service Tax Deferred Input A/c	Dr	4.94
To Vendor A/c	Cr		97.90
To TDS Payable A/c	Cr		2.10
To Service Tax Payable A/c - under Reverse Charge	Cr		4.94
		104.94	104.94

* Illustrations in case of Vehicle Hiring (Ratio - 60:40)

Issue - Credit the "Service Tax Payable A/c - under Reverse Charge" while booking the invoice OR while payment to the Vendor