VCES and CENVAT Credit
IN the Mysore Central Excise RAC meeting, a Member asked a question:
A Trade Association registered as a Public Charitable Trust conducts conferences, seminars every year and collects entry fee/sponsorship. The association though registered with service tax, not collected and paid service tax on this activity. The said association now wants to avail the benefits extended by the Service Tax Amnesty scheme and intends to make a declaration and pay the service tax dues. The point raised is "Can the association avail the Cenvat credit?"
The Department replied,
In terms of Rule 6(2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013 which is framed under the Service Tax Voluntary Compliance Encouragement Scheme 2013, “the Cenvat credit shall not be utilized for payment of tax dues under the Scheme.” Hence, it is clear that the service tax liability under the Scheme has to be paid in cash and no Cenvat credit can be utilized.
Further, no provision is made either in the Service Tax Voluntary Compliance Encouragement Rules, 2013 or in the Service Tax Voluntary Compliance Encouragement Scheme 2013 for taking Cenvat credit on the inputs or input services. As per the provisions of Section 112 of Chapter VI of the Finance Act, 2013, no other benefit is available to them, other than the immunity from penalty, interest as provided in Section 108 of the said Act. Hence, no Cenvat credit benefit is available to the declarant under Service Tax Voluntary Compliance Encouragement Scheme 2013. The members were also informed that, to avail the benefit of the scheme, 50% of the dues are to be paid on or before 31/12/2013 and the remaining 50% dues are to be paid on or before 30/06/2014.
CBEC in Circular No. 170/5 /2013 - Service Tax, dated 08.08.2013, clarified as follows:
17 | Whether the CENVAT credit is admissible on the inputs/input services used for provision of output service in respect of which declaration has been made under VCES for payment of any tax liability outside the VCES? | The VCES Rules 2013 prescribe that CENVAT credit cannot be utilized for payment of “tax dues” under the Scheme. Accordingly the “tax dues” under the Scheme shall be paid in cash. The admissibility of CENVAT credit on any inputs and input services used for provision of output service in respect of which declaration has been made shall continue to be governed by the provisions of the Cenvat Credit Rules, 2004. |
18 | (a)Whether the tax dues amount paid under VCES would be eligible as CENVAT credit to the recipient of service under a supplementary invoice? (b) Whether cenvat credit would be admissible to the person who pays tax dues under VCES as service recipient under reverse charge mechanism? | Rule 6(2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013, prescribes that CENVAT credit cannot be utilized for payment of “tax dues” under the Scheme. Except this condition, all issues relating to admissibility of CENVAT credit are to be determined in terms of the provisions of the Cenvat Credit Rules. As regards admissibility of CENVAT credit in situations covered under part (a) and (b), attention is invited to rule 9(1)(bb) and 9(1)(e) respectively of the Cenvat Credit Rules. |
Of course the RAC meeting took place about forty days before the Board Circular.