Question61: During audit, queries regarding non-payment of service tax under reverse charge mechanism are raised. Credit of service tax under reverse charge mechanism was admissible under Central Excise and Service Tax law. The question arises as to what will be the status of such service tax paid in respect of earlier period at the time of audit. Legally such credit should be admissible. But there is no provision in the system to claim the credit. So what to do'

Answer: Section 142(7)(a) specifies that all the demand of earlier period will have to be deposited in cash and further it restrict the ITC of the same.

So this credit will not be allowed

Section 142(7) (a) reproduced here under :-

SECTION 142 OF CGST ACT

7) (a) every proceeding of appeal, review or reference relating to any output duty or tax liability initiated whether before, on or after the appointed day under the existing law, shall be disposed of in accordance with the provisions of the existing law, and if any amount becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of duty or tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. (REPLY dt. 19/02/2018)