GST UPDATE ON SERVICE TAX CREDIT TO BE CARRIED FORWARD IN GST REGIME

GST UPDATE ON SERVICE TAX CREDIT TO BE CARRIED FORWARD IN GST REGIME

Every registered person under GST who wants to take transitional credits as per transitional provisions is required to fill TRAN-1 within 90 days from appointed day i.e. 28th September, 2017, which has been extended till 31^st October, 2017. The pre-requisite to file TRAN-1 was that such credits can be availed only if registered person has filled all the returns for preceding six months required under existing laws, otherwise he is not eligible to claim transitional credit. Balance amount which was carried forward in last return is an eligible credit under GST regime.

Circular no. 207/5/2017-Service Tax dated 28th September, 2017 had been issued to clarify regarding admissibility of credit on services covered under reverse charge for the month of June, 2017. It is worthwhile to mention here that the last date of payment of service tax under reverse charge for the month of June, 2017 was 5th/6th July, 2017 and credit is admissible if following conditions are satisfied:

·        The services should have been received up to 30/06/2017.
·        The payment for value of invoice raised in respect of these services should also have been made up to 30/06/2017.
·        The service tax on these services should have been paid after 1st July but before 5th/6th July, 2017.

For making such assessee carry forward their credit, due date for filing return has also been extended so that such credit can be availed through revised return. This circular has been beneficial to a lot of assessee who wanted to take this credit but could not due to lack of clarity.

As per the circular, credit on services covered under reverse charge can be availed if payment is made on 5^th /6^th July, 2017 for the month of June, 2017 by considering that such payment of service tax was done in the month of June itself. Now, according to Rule 4(7) of CENVAT Credit Rules, 2004, 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. Thus, according to this rule credit on these services can be availed only after making payment of tax which is made after 1^st July but before or on 5^th/6^th July. There could be litigation on the matter that since service tax had not been paid on 30.06.2017, credit cannot be availed as on 30.06.2017.

It was held in the case of Collector of Central Excise, Vadodara Vs Dhiren Chemical Industries [2002 (139) ELT 3 (SC)], that board circulars are binding on the departmental officers and they cannot contest or challenge the contents of the circular. However, there is another Supreme Court decision given in the case of CCE, Bolpur Vs M/s Ratan Melting & Wire Industries [2008-TIOL-194-SC-CX-LB] which states that if the circular is contrary to the statutory provisions, the revenue authorities have the right to challenge the said circular and contest them.

In view of the above decisions, the circulars which are contrary to existing legal provisions are not sustainable. In instant case, circular cannot override statutory provision i.e. CENVAT Credit Rules, 2004. Thus, in such cases it is more likely that the department may take shed of the decision given in the case of CCE, Bolpur Vs M/s Ratan Melting & Wire Industries [2008-TIOL-194-SC-CX-LB] to prove that the circular so issued is against the existing legal provisions.

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Your Need Our Concern…

Thanking you,

Regards,

Pradeep Jain, F.C.A.

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GST UPDATE ON SERVICE TAX CREDIT TO BE CARRIED FORWARD IN GST REGIME

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