This article summarizes Circular No 122/03/2010 -ST F. No. 137/71/2009 – CX.4 dated 30 April 2010 (Circular) providing clarification on issues arising in respect of the availment of CENVAT Credit in relation to book adjustments for Associated Enterprise transactions and invoices, for which payments have not been received in total.
Summary of the Circular
The Circular addresses the following issues relating to availment of CENVAT credit:
Whether CENVAT credit can be claimed when payments are made through debit/credit notes and debit/credit entries in books of account or by any other mode for transactions between ‘Associate Enterprises’
Or
Whether CENVAT credit can be claimed where a service receiver does not pay the full invoice value and the service tax indicated thereon, due to some reasons.
The Circular provides the following clarification on the above issues:
In the case of ‘Associate Enterprises’, credit of service tax can be availed when the payment has been made to the service provider either by way of a book adjustment, issue of credit or debit notes or the debiting or crediting of any account and the service tax has been deposited with the Government.
The service receiver can avail CENVAT credit equivalent to the amount that is paid as service tax, whether proportionately reduced or the original amount, to the service provider. However, in case of subsequent refund or extra payment of service tax, the CENVAT credit would be altered accordingly.
Dear Sir
The following wordings in this article (in the last but one para) is more confuing ::
“… and the service tax has been deposited with the Government”
Where do we pay the ST to the Govt?? We pay only the bill value to the vendor, and he only pays tax with the Govt…
Pl clarifiy