Procedures prescribed for the refund of Cenvat credit taken on inputs and input services used for providing specified services on which Service tax is payable under the partial reverse charge mechanism

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Information about Procedures prescribed for the refund of Cenvat credit taken on inputs...
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Published on March 6, 2014

Author: kpmgindia

Source: slideshare.net

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Rule 5B of the Cenvat Credit Rules, 2004 (introduced with effect from 1 July 2012) provides for refund of Cenvat credit to service providers who are providing services covered under the reverse charge mechanism, subject to conditions/procedures as may be prescribed. The Central Government vide Notification No. 12/2014-Central Excise (N.T.), dated 3 March 2014 (the Notification) has now prescribed the procedure to be followed for claiming refund of unutilised Cenvat credit taken on input and input services.

KPMG FLASH NEWS KPMG IN INDIA Procedures prescribed for the refund of Cenvat credit taken on inputs and input services used for providing specified services on which Service tax is payable under the partial reverse charge mechanism 6 March 2014 Background Rule 5B of the Cenvat Credit Rules, 2004 (introduced with effect from 1 July 2012) provides for refund of Cenvat credit to service providers who are providing services covered under the reverse charge mechanism, subject to conditions/procedures as may be prescribed.  Security services; and  Service portion in the execution of a works contract. Other aspects The Central Government vide Notification No. 12/2014Central Excise (N.T.), dated 3 March 2014 (the Notification) has now prescribed the procedure to be followed for claiming refund of unutilised Cenvat credit taken on input and input services. Salient features of the notification are as follows:  The unutilised Cenvat credit shall be calculated by proportioning the total Cenvat credit taken on inputs and input services in the ratio of turnover of services on which Service tax is payable under partial reverse charge mechanism with the total turnover of goods and services;  The amount of refund shall be limited to the amount of Service tax required to be paid by the Service receiver on such services;  The refund claim shall be filed after filing of Service tax return for the period for which refund is claimed; Coverage Following services are covered under the Notification:   Renting of a motor vehicle designed to carry passengers, to any person who is not engaged in a similar business, where service tax is payable on the total value of service (i.e. non abated value); Supply of manpower for any purpose; © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

 The refund claim shall be filed in a prescribed format, within one year from the due date of filing of Service tax return for the half year, in which the Cenvat credit is taken;  The last date of filing refund claim for the period July 2012 to September 2012 has been notified as 30 June 2014. The amount claimed as refund shall be debited by the claimant from his Cenvat credit account at the time of making the claim. Our Comments Issuance of the notification should ease up cash flow issues that had arisen on account of accumulated Cenvat credit. For example, in case of the infrastructure sector, where EPC contracts are executed under the consortium model (and the consortium and its members are treated as separate taxable persons), the consortium can now claim refund of Cenvat credit that has been accumulated on account of Service tax charged to it by consortium members. The industry would now hope that the refund claims are also processed in a timely manner. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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