Refund of Unutilised CENVAT Credit under Rule 5B - Where is Notification?
A significant change in the Service Tax administration from 01.07.2012 is the partial reverse charge method introduced on certain specified services. Under this system, the service receiver has to pay the specified portion of the service tax and the service provider will pay the remaining portion. Since the liability of the service provider is only a part of the full tax liability, there is every possibility for accumulation of CENVAT Credit in service providers' accounts. This issue has already been identified by the department and the JS(TRU) letter dated 16.3.2012 says "In extreme situations the small service provider is also being allowed the refund of unutilized CENVAT credit if any, available with him. Suitable changes will be made in CENVAT Credit Rules, to this effect".
They have kept their word and vide Notification No 28/2012-CX., (N.T.), Dated : June 20, 2012, a new Rule 5B has been inserted in the CENVAT Credit Rules, 2004 as under:
5B. Refund of CENVAT credit to service providers providing services taxed on reverse charge basis. - A provider of service providing services notified under sub-section (2) of section 68 of the Finance Act and being unable to utilise the CENVAT credit availed on inputs and input services for payment of service tax on such output services, shall be allowed refund of such unutilised CENVAT credit subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette.
Unfortunately, the job is not over yet and a Notification prescribing the conditions or procedures has to be issued under Rule 5B. But so far, no such Notification has been issued. It is now nearly four months after the launch of partial reverse charge method and many assessees may be facing the problem of accumulation of CENVAT Credit under partial reverse charge.
While it is laudable that the Board recognised this problem while making these changes and even amended the CENVAT Credit Rules, it is deplorable that the Board has not issued the notification to specify the procedure, safeguards, conditions and limitations.
DDT hopes the Notification will be issued immediately to save the assessee from the ligation of time bar later.