Cenvat credit can be availed on accrual basis

With effect from April 1 2011, Rule 9 of the Point of Taxation Rules has been amended to provided that services for which provision is completed on or before June 30, 2011 or where the invoices are issued up to June 30, 2011, the point of taxation shall, at the option of the taxpayer, be the date on which the payment is received or made as the case may be. The intention is to give an option to the assessee to come into point of taxation from April 1, 2011 or July 1, 2011. Based on this amendment the assesse can continue to pay service tax on payment basis till June 30, 2011.
 

With effect from April 1, 2011, Notification no.13/2011-CE.NT has amended rule 4(7) of the Cenvat credit rules 2004. Amended rule 4(7) is reproduced below:-

(7) The Cenvat credit in respect of input service shall be allowed, on or after the day on which the invoice, bill or, as the case may be, challan referred to in rule 9 is received:

Provided that in case of an input service, where the service tax is paid on reverse charge by the recipient of the service, the Cenvat credit in respect of such input service shall be allowed on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9:

Provided further that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9, is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the Cenvat credit availed on such input service and in case the said payment is made, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the Cenvat credit paid earlier subject to the other provisions of these rules.

Provided also that if any payment or part thereof, made towards an input service is refunded or a credit note is received by the manufacturer or the service provider who has taken credit on such input service, he shall pay an amount equal to the Cenvat credit availed in respect of the amount so refunded or credited.

Prior to April 1, 2011, as per Rule 4(7) of the Cenvat credit rules 2004, credit of input services could be availed only after the output service provider makes payment of value of input services and the service tax payable on it, as shown in invoice of input service provider.

Now with the amendment in Rule 4(7), Cenvat credit of service tax in respect of input services can be availed on receipt of the invoice like in case of excise duty, where credit of excise duty is available as soon as the goods are received in the factory. You can now claim Cenvat credit of excise duty paid on inputs or capital goods and service tax paid on input services against your service tax liability without even making payment to the supplier of the goods or services.

Source : Daily News & Analysis, India, dated 05/05/2011

 

 

 
 

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