Refund to Service Providers covered under Partial Reverse Charge

At the time of introduction of Partial Reverse Charge, Government has inserted Rule 5B of CENVAT Credit Rules 2004. This rule is inserted to provide benefit of refund claim of unutilized CENVAT Credit to Service Providers covered under partial reverse charge however notification (Notification No. 12/2014-CE(NT) dated 3^rd March, 2014) to provide procedure, safeguards, conditions and limitations for refund claim is issued after lapse of around one and half year of introduction of Rule 5B.

 

Under this Notification benefit of refund claim is available in respect of following services covered under partial reverse charge (partial reverse charge services):-

1. Rent-a-Cab (where service provider has not opted benefit of abatement);
2. Manpower Supply Service;
3. Security Service; and
4. Works Contract Service

Refund Amount:

 

CENVAT Credit taken on inputs and input services during the half year * Turnover of output service under partial reverse charge during the half year / Total Turnover of the goods and services during the half year

Less

Service Tax paid by the service provider for such partial reverse charge services during the half year

 

Maximum amount of Refund Claim:

Amount of service tax liability paid or payable by the recipient of service with respect to the partial reverse charge services provided during the period of half year for which refund is claimed.

 

For Example: Details of Security Services provided by Mr. A during half year:-

 

Service Receiver	Turnover	Service Tax Liability (Service Receiver)	Service Tax Liability (Service Provider)
Body Corporate	Rs. 80 Lakh	Rs. 7,41,600/-	Rs. 2,47,200/-
Individual/Firm	Rs. 20 Lakh	Nil	Rs. 2,47,200/-

 

CENVAT Credit Availed: Rs. 10 Lakh

 

Refund Amount as per Formula (A) = Rs. 10*80/100 Lakh less Rs. 2,47,200 = Rs. 5,52,800/-

Maximum Amount of Refund Claim (B) = Rs. 7,41,600/-

Refund Amount (A or B, whichever is less) = Rs. 5,52,800/-

 

Period of Refund Claim:

 

Half Yearly

 

Due date of filing of Refund Claim:

 

Within one year from the due date of filing of return for the half year. If more than one return is required to be filed for the half year, then the time limit of one year shall be calculated from the due date of filing of the return for the later period.

Notification also provides that the last date of filing of application in Form A, for the period starting from the 1st day of July, 2012 to the 30th day of September, 2012 shall be the 30th day of June, 2014.

 

The notification also clarifies that no refund shall be admissible for the CENVAT credit taken on input or input services received prior to the 1st day of July, 2012.

Atul Kumar Gupta
B Com (Hons) FCA, FCMA, MIMA, CIQA, PGDEMM
Central Council Member of ICAI (2013-16)