The recent Amendment in bringing Time-Limit of 6 months for availing CENVAT CREDIT is now effective from September, 01, 2014. As per union budget 2015 time limit for cenvat credit has been increased to 1 year from 6 months.
(I)Time Limit for Availing the Cenvat Credit
As per Service Tax Credit Rule time Limit for Availing the Cenvat Credit will be as below –
Rule 4(1) and Rule 4(7) of Cenvat Credit Rules, 2004, has been amended vide Notification No.21/2014 Central Excise (N.T.) dated 11.07.2014 wherein it has been specified that a provider of output service cannot avail Cenvat credit of inputs/input services after expiry of 6 months from the date of issue of invoice.
RULE 4 (7) of the Cenvat Credit Rules, 2004 allows CENVAT CREDIT in respect of input service on or after the day on which the invoice/bill is received. “Provided also that in case payment of the value of input service on invoice/bills, is not made within three months of the date of the invoice/bill the manufacturer/ service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service.
AMENDMENT:-From 1st September 2014, Sixth proviso is being inserted in Rule 4(7) by Notification No. 21/2014- CE(NT) Dated 11.07.2014 to mandate that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of invoice .
AMENDMENT in time limit for availing the cenvat credit in Budget 2015 – As per union budget 2015 time limit for availing the cenvat credit has been increased to 12 months from 6 months.
(II) IMPACT OF CENVAT CREDIT AMENDMENT ON ASSESSEE
2.1 All Pending Credit must be taken prior to 31.08.14.
2.2 Credit should be Included in ST-3 Return & not only retained in books;
2.3 Cenvat Credit prior to the Service Tax Registration:
If the assessee uses various inputs and input services for providing taxable output services at a later date. Hence, it is advisable that the assessee must immediately take service tax registration in which taxable output services will be provided. And such Credit must be duly reflected in the Periodical ST-3 Return. This has to be done prior to 31.08.2014 and in future also this compliance need to be done.
2.4 Advanced Payments:
Where advance is paid for availing services, but the services have not been utilized by the assessee, Cenvat credit can be taken on making advance payment and on receipt of invoice for the same from the service provider.
2.5 Disputed Cenvat Credit:
In certain cases, Cenvat credit with respect to certain input services / inputs may be denied by the department. In such case credit must not be utilized against service tax/excise liability to ensure that no interest liability arises in case the credit is finally held to be ineligible.
It is advisable to inform department, because if intimation is given to department, penalty cannot be imposed, as your bona fides are clear from letter to department.
(III) Utilization of Cenvat Credit – No Time Limit:
Though the amendment prescribes limited time period for availability of Cenvat Credit there is no time limit for utilization of same once validly claimed in ST-3 returns. Utilization can extend beyond six months.
(IV) What happens if Payment is made to Service Provider After 6 Month?
At present, assessee can take Cenvat credit immediately on receipt of invoice but as per proviso to rule 4(7) of Cenvat Credit Rules, assessee is required to pay amount equal to Cenvat credit taken if payment is not made within three months (normally termed as ‘reversal of Cenvat Credit).However assessee can take back the Cenvat Credit subsequently after making payment to service provider. It is possible that he may pay to service provider after 6 months of date of invoice/bill. In that case, can he take Cenvat Credit?
As per Notification No. 21/2014-CE (NT) dated 11.07.2014, once Assessee has taken the Cenvat credit on basis of invoice of service provider. Later, when he is again taking back the Cenvat credit, he is taking Cenvat credit on basis of his payment advice and not on basis of invoice. The restriction of 6 months applies to availment of CENVAT Credit for the first time and not to subsequent credit i.e. RE-CREDIT.
(v)Does the CENVAT CREDIT Amendment provision apply to invoices issued prior to 1-9-2014?
The provision of taking Cenvat credit is a procedural amendment. Hence, it should apply to all Cenvat Credit taken on or after 1-9-2014.
(a) Cenvat Credit must be taken within 6 months from the date of issue of invoice in ST-3 return. If not taken in ST-3 the credit will lapse. Utilization can extend beyond 6 months.
(b)Cenvat credit Availed in ST3 return and reverse after 6 month than the provision of Credit must be taken in Six month will not apply in case of reversal of credit.
BUDGET 2015 AVAILMENT OF CENVAT CREDIT ON INPUT/INPUT SERVICE
As per budget 2015 time limit for availing the cenvat credit by the assessee has been increased to 12 months from 6 months.