Goods and Services Tax – GST – By: – Lalgudi Karthikeyan – Dated:- 15-12-2017 – With reference to the article published in these columns on the above subject it is felt that the approach should begin with questioning the necessity of the second proviso under Section 16(2). It has been rightly pointed out by the Author(s) that when payment of service tax was linked to receipt of the value of taxable services by the service providers, availability of credit to the recipient was restricted. There is strong logic in the provision, as failure by the recipient to pay the value and tax amount to the service provider, resulted in non payment of service tax to the Government. But for the restriction, the service recipient would take and utilize cre
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e restriction on availing credit after making payment to the service provider should have been abandoned immediately after the notification of the Point of Taxation Rules, 2011. However, if it may be stated so, in an apologetic and reconciliatory tone, Rule 4(7) was amended to state that the credit shall be reversed if the payment is not made within three months. It may be recalled that, as an exception to the general rule of payment of service tax after receipt of consideration, in respect of transactions between associated enterprises, service tax was made payable on book adjustments also. The CBEC had issued Circular No.122/03/2010-ST dated 30.4.2010 addressing the eligibility to take credit in such cases as against the restriction in Ru
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rtionately reduced or the original amount) to the service provider. The invoice would in fact stand amended to that extent. The credit taken would be equivalent to the amount that is paid as service tax. However, in case of subsequent refund or extra payment of service tax, the credit would also be altered accordingly. It is felt that the same principle should be applied for interpretation of the second proviso to Section 16(2), if at all it should exist in the Statute and where there is reduction of the service amount or retention of part of the amount in terms of contractual agreement between the supplier and the recipient, reversal of proportionate credit should not be advised or insisted upon, unless and until there is reduction in tax
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