Clarification regarding availment of credit on input services — Circular No. 122/03/2010-ST, dated 30-4-2010.

By this Circular following issues regarding avail-ment of
credit on Input services have been clarified :

(a) As per Rule 4(7) of the CENVAT Credit Rules, 2004, the
CENVAT credit on input services is available only on or after the day on which
payment is made of the value of input service and service tax. The Rule however,
does not mention form of payment, nor does it place restriction on payment
through debit in books of account or book adjustment. Therefore, it is clarified
that if the service charges as well as the service tax have been paid in any
prescribed manner so as to be entitled to be called ‘gross amount charged’
within the meaning of S.67(4) of the Finance Act, 1994, then credit should be
allowed under said Rule 4(7).

(b) In the cases where the receiver of service reduces the
amount mentioned in the invoice/bill/challan and makes discounted payment, then
it should be taken as final payment towards the provision of service. The
invoice in fact stands amended to that extent and accordingly credit taken would
be equivalent to the amount that is paid as service tax. The mere fact that
finally settled amount is less than the amount shown in the invoice, does not
disentitle the service receiver to take credit of input service tax paid.