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Cenvat Credit
Coverage Today
Understanding of CENVAT credit and the provisions
Dimensions
Facilitating provision and not levy provisions Key in decision making
Compliance
tax. Power
Sec. 37(2) (xvia) & (xviaa) of Central Excise Act, 1944 Sec. 94(1)(ee) & Sec 94(1)(eee) of Finance Act, 1994
Central Excise Credit came in 1986 MODVAT Changed into CENVAT credit in 2000 Service Tax Credit in 2002 Merged into one in 2004
Additional duty of excise T & T and GSI. Education cess on Excise Duties. Service tax. Education cess on Service Tax. NCCD duty, Cess on Tea, AED (P&TP)
Paid on what
Inputs Recd. in Factory or TSP premises Capital Goods - Recd. in Factory or TSP premises Input Services Recd. By Mfr. or TSP
all goods, except LDO, HSD, MS, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not
lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
all goods used in the factory by the manufacturer of the final product; or any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or all goods used for generation of electricity or steam for captive use; or all goods used for providing any output service;
a building or a civil structure or a part thereof; or laying of foundation or making of structures for support of capital goods,
Services or Airport Services Commercial of Industrial Construction Services, Residential Complex Services, Works Contract Services.
Capital goods except when used as parts or components in the manufacture of a final product Motor vehicles;
goods, such as
a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for
personal
Any
goods which have no relationship whatsoever with the manufacture of a final product.
and includes
used by a provider of taxable service for providing an output service, or used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, services used in relation to
advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs,
a factory, premises of provider of output service or an office relating to such factory or premises,
financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security,
inward transportation of inputs or capital goods and outward transportation upto the place of removal
by a provider of taxable service for providing an output service; or used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,
and includes
services
used in relation to
renovation or repairs of (setting up is
modernization,
removed)
a factory, premises of provider of output service or an office relating to such factory or premises,
advertisement
or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing,
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and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, - New legal services, - New inward transportation of inputs or capital goods and outward transportation upto the place of removal;
Port Services or Airport Services; Commercial of Industrial Construction Services; Residential Complex Services; Works Contract Services in so far as they are used for- Construction of a building or a civil structure or a part thereof; or
Exception it is used for providing one or more of the above said specified services; Insurance, Rent-a-cab, authorised service station & supply of tangible goods services relating to motor vehicle Exception courier, tour operator, rent-a-cab, cargo handling, GTA, outdoor catering & Pandal and shamiana services
outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits
extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;
85(Mach. & Equip), 90(Instruments & apparatus), 68.02(abrasive), 68 01.10(grinding wheel) Pollution Control Equipments components, spares and accessories of above; moulds and dies, jigs and fixtures refractories and refractory materials tubes and pipes and fittings thereof; and storage tank.
Used for providing taxable service. For specified service category of service providers
all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, [heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act; pollution control equipment; components, spares and accessories of the goods specified at (i) and (ii); moulds and dies, jigs and fixtures; refractories and refractory materials; tubes and pipes and fittings thereof; and storage tank,
rent-a-cab, cargo handling, GTA, outdoor catering & Pandal and shamiana services provider for providing such services dumpers or tippers, falling under Chapter 87 (motor vehicle), registered in the name of Site formation services or Mining services provider for providing such services components, spares and accessories of motor vehicles, dumpers or tippers, as the case may be, used to provide above services
the goods For Input Service Service tax attributable to payment of value of the taxable service. For capital goods not more than 50% of the duties entitled for. But full Addl. CVD can be taken in the year of receipt. Balance credit in subsequent years on holding possession of such goods(except for components, spares etc.,) .
Stage dealer, Second Stage dealer, Bill of Entry Supplementary Invoice Certificate by appraiser of Customs Challan evidencing payment of duty by specified Service Provider Invoice, Bill or Challan issued by TSP or ISD
CENVAT Credit The Cenvat Credit on input services availed on receipt of invoice. The payment made within three months If not the credit availed has to be reversed/paid Credit on the invoices issued prior to 01.04.2011 by the service provider would continue to be eligible only on payment basis T.R. Rajesh Kumar
received in a factory or in the premises of the provider of output service or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory, at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year.
service is returned, the manufacturer or the service provider who has taken credit on such input service, pay an amount proportionate to the CENVAT credit availed in respect of the amount so returned. This amount paid by debiting the CENVAT credit or otherwise on or before the 5thof next month/quarter or 31st in case of march. If failure happens, it would be recovered in terms of Rule 14.
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Additional CVD is not available for paying service tax AED(TTA), NCCD, Education Cess, CVD equal to these Credit, Cess on Tea and AED (P&TP) can be utilised only for paying the the respective duty.
challan Same has to come back within 180 days. There is no time limit for jigs, fixtures, moulds and dies With the permission from AC/DC, the goods can be directly removed from JW Premises on following certain proc.
for providing Taxable output service for providing free warranty for final products
off fully or partially has been made in the books of account then the manufacturer or service provider, as the case may be, pay an amount equal to the CENVAT credit taken on said input or capital goods : If the said input or capital goods is subsequently used in the manufacture of final products or the provision of taxable services, the manufacturer or output service provider, shall be entitled to take the credit of the amount equal to the CENVAT credit paid earlier.
Refund of Credit
Not available except for exporters Credit on inputs and input services used in export of
goods and services is available for other domestic payments. Not possible refund can be claimed Export of service is in terms of Export of Service Rules, 2005.
Exempted Goods/Services-Before
Output service = Taxable Service Exemp Serv= Serv not specified + exempted under
Section 93 Export of Taxable service will not be considered as exempted services. Exempted goods = Exempted by Notification and Nil rate of goods.
services No credit Inputs/Input service exclusively used for providing taxable services Full Credit Inputs partially used for taxable and exempted
Option 1. Separate records - take credit only used for taxable portion. Option 2. No separate records take entire credit but
Utilise
Credit of specified 16 services fully. Utilise Other credits only to the extent of 20% of total ST -1.4.2008-after-10% upto 7.7.2009- then 8%
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Erection and Maintenance and Tec. Testing & Commissioning Repair Analysis Tec. Inspection &Forex Broker Certification Intellectual Prop. Serv.
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Industrial Construction.
goods No credit Inputs/Input service exclusively used for dutiable goods Full Credit Inputs partially used for both
Option 1. Separate records - take credit only used for taxable portion. Option 2. No separate records take entire credit but have to pay 10% of exempted value of goods-Now 5% after 1.4.2011
Rule 6 major change Sub Rule 1-Cenvat credit benefit would not
be allowed on inputs or input services used in or in relation to manufacture of exempted goods or for provision of exempted service sub rule 2 provides for maintenance of separate records in more detailed manner in respect of receipt, consumption an inventory of inputs and the receipt and use of input services used for exempted & dutiable/taxable goods and services
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exempted service to pay 5% on the value of exempted service Sub rule 3 in addition to option of paying 5% amount on exempted goods/exempted services or claiming the Cenvat credit proportionately as provided in Rule 6 (3A), a new option to maintain separate accounts for the receipt, consumption and inventory of inputs and pay an amount as determined under sub-rule (3A) in respect of only input services
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including NBFC, providing banking and financial services to pay an amount equal to 50% of the credit availed. services relating to life insurance or management of ULIPs amount equal to 20% of credit availed rule 6 (6A) -the provisions of Rule 6 shall NA in case of taxable services provided, without payment of service tax to SEZ unit or developers for authorized operations.
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other international organizations Export under Bond Gold or silver in Mfr. of copper or Zinc. Goods supplied for specified ICB.
spend centrally on services These may need to be distributed for the credit to be availed at each of the premises of multiple registration entities. By way of an invoice the same can be spread out. Presently no norms on the % ages.
distributed by way of invoice/ bill Amount not to exceed the service tax credit received Half Yearly return of Credits received and distributed during such period by the end next month.
Records
For inputs and capital goods
Receipt, disposal, consumption and inventory of the input and capital goods Further the value, duty paid, CENVAT credit taken and utilized and supplier name and address. The value, tax paid, CENVAT credit taken and utilized, the person from whom the input service has been procured has to be maintained.
Benefits of Credit
If no credit the cost will be increased to the extent of
duty/tax paid on inputs and input service Thereby Profit will decrease The product will become costlier than the person taken credit loose competitiveness.
Value adds
Manufacturers can take Service Tax credits SP can take inputs and capital goods credit Procurement from dealers regd under Central Excise is
important if reqd. Choice of payment of tax/duty to ensure credit Better purchase policies. Exporters - Registration even if not liable Avail credit on ALL with intimation when in doubt. If objected reverse under protest.
Issues
Whether the credit of tax paid on services provided
from outside India and received in India can be taken as credit. Whether Section 66A is leaning back to Section 66.
Issues
The inputs/capital goods should be received in the
premises of service provider. What is the premises of service provider. Is it only the registered premises. Whether the premises of client can also be considered as premises of service provider
Issues
For input services there is no condition attached as to
Issues
There is no difference as to usage of capital goods or
inputs. The capital goods can also be construed as inputs (except motor vehicle) as input covers all goods. The objection can be since capital goods are specifically mentioned, the same cannot be considered as inputs.
Issues
Non-taxable services is not considered as output
services. Whether the term used FOR and not IN RELATION TO will restrict the scope of credit. The term used by taxable service provider for is not applicable for Inclusive definition
Issues
Whether there is a time limit for availing credit as
the statute uses the word immediately on receipt of goods. Whether proportionate amount of credit can be taken though the entire amount of value of services is not yet paid. Whether balance 50% credit can be taken in the subsequent year if depreciation is claimed on capital goods. Whether credit of service tax paid prior to registration can be taken.
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Issues
Whether tax payment of challan can be basis of taking
credit even if the document is not specifically mentioned in the rules. Whether the credit of service tax can be taken in case the invoice is addressed to different premises of the service provider. Whether the credit of inputs/capital goods can be taken if it is addressed to other premises.
Issues
Whether Basic Tax/duty can be used for payment of
Ed. Cess or SHE Cess. Whether the tax/duty credit available later can be used for payment of arrears of service tax.
Issues
Refund of credit on capital goods cannot be claimed. Other routes like rebate of service tax paid on inputs
Issues
Whether credit of only 20% to be taken in case of
common input services. Whether unutilised credit can be carried forward. Whether there is any time limit for utilisation. What happens in case of trading and servicing.
Issues
Credit on Stock of inputs when services become
chargeable. If capital goods are cleared as waste and scrap Mfr. to pay on T.V. If capital goods is removed in the same year Balance 50% can be taken as credit.
by him credit available Credit on Stock of inputs when goods or services become chargeable. Removal of inputs or capital goods as such Amt. Equal to credit availed to be paid. Service provider need not pay
if inputs is for providing service. If Capital goods is for providing service and comes back within 180 days + 180 days of permission.
to pay on T.V. Duty paid on removal of inputs, capital goods and capital goods waste is eligible for credit. If capital goods is removed in the same year Balance 50% can be taken as credit. If capital goods are acquired on lease, hire purchase or loan agreement, from a financing company credit is available.