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“ CENVAT  Provisions w.e.f. 01-07-2012 ”

 

1.Persons Eligible to take credit

 

  • Manufacturer of final products
  • Provider of output service

 

2.Definitions

 

1. Capital Goods

 

Manufacturer

 

Includes: Goods specified in Rule2(a)(A)

Excludes: Equipment or appliance used in "Office"

 

Service Provider

 

Includes: Goods specified in Rule2(a)(A)

 

Motor Vehicle [meant for goods transport] owned by Service Provider and used for :

Motor Vehicle[ meant for passenger transport] owned by Service Provider and used for:

Motor Vehicle (MV)

(a) Renting of Vehicle

(a) Transport of Passengers

(b) Transportation of goods for providing service

(b) Renting of Vehicle

(c) Providing courier service

(c) Imparting Driving Skills

2. Inputs

 

Includes

Excludes

 

Goods used "in factory by manufacturer" of final product

Diesel and Petrol and certain specified capital goods

 

Goods used for providing any output service

Motor Vehicles

MV

Cerain accessories cleared with final product

Goods for personal use or employee consumption

 

Goods used for generation of steam/ or electricity for captive use

Goods unrelated to manufacture of final product

 

[NOTE] - Goods used for providing following services are allowed as inputs
(a) Service Portion of Works Contract
(b) Construction Services by a builder

Goods used for:-
(a) Construction/ Works contract of building or civil structure
(b) Foundation/ structures for support of capital goods

Construction

[NOTE] - It may further be noted that in case a builder intends to take input credit, no abatement u/n 26/2012 {75%} is allowed

3. Input Service

 

Any Services used for providing "output Service"

 

Any Services used in or in relation to manufacture of final products or for clearance upto place of removal

 

Includes

Excludes

 

Services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises

"Specified Services" used for-

(a) Construction/ works contract of a building/ civil structure
(b) Foundation/ structures for support of capital goods

Construction

Advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs

"Specified Service" means
(a) Service portion in execution of works contract
(b) Construction Service
(c) Construction service by a builder

accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services

[Exception] Specified services used for providing specified services are allowed as input services
[Note] Thus input services used by a builder should be allowed as credit

Inward transportation of inputs or capital goods and outward transportation upto the place of removal

Following service of "Motor vehicles which is not capital goods"
a) Renting
b) Insurance, servicing, repairs and maintenance

Motor Vehicle

[Exception] Insurance, servicing, R&M allowed on vehicles used by:
a) Manufacturer of motor vehicle
b) Insurance company in respect of insurance or reinsurance

Services for personal use or employee consumption

Personal

4. Exempted Goods

 

a) Non excisable goods
b) Exempted from whole of duty of Excise
c) NIL rate of duty goods
d) "Exempted goods" u/n 1/2011-CE(1% of excise duty)
e) "Exempted goods u/n 12/2012-CE-[entries 67 and 128]

 

5. Exempted Services

 

a) Non-Taxable Service 
b) Service exempt from whole of service tax
c) Taxable Service whose part of value is exempted on the condition that no credit of inputs/ input services is taken

 

6. Output Service

 

Means:
a) Service provided by a Service Provider
b) Located in Taxable Terrotiry

Does not include following service:
a) Negative List Service
b) Service where whole of service tax is liable to be paid by service recipient

 

 

 

3.Admissible Credits [Rule 3]

 

Credit of a) various duties of excise and b) service tax on following is allowed -

 

  • Inputs received in the factory or premises of output service provider

 

  • Capital goods received in the factory or premises of output service provider, upto 50% in the year of receipt and balance in the succeeding years

 

[Service provider required to maintain documentary evidence and location of inputs and capital goods]

 

  • Input service received by the manufacturer/ service provider on the basis of invoice.

 

  1. In case of non payment of the above within a period of 3 months of date of invoice, credit  is reversed and again allowed on payment of invoice
  2. Cenvat in case of reverse charge is allowed to service recipient on payment basis only.

 

  • Credit allowed as on last day of month/ quarter

 

4.Utilization of CENVAT Credit [Rule 3]

 

  • Excise duty on final product
  • Service tax on output service
  • Cenvat on inputs and Capital goods removed subject to certain conditions

 

 

Non Utilization

  • Cenvat cannot be utilized for payment of excise duty on goods availing exemption u/n 1-2011-CE

 

  • Cenvat cannot be utilized for discharging liability as a service recipient

 

 

5.Refund of Cenvat Credit to Exporters [Rule 5]

 

  • Eligibility: Manufacturer exporting goods without payment of duty or Service provider exporting services without payment of tax

 

  • Scheme: Refund of Cenvat credit allowed as

 

Export turnover of (Goods+ Services) x Credit on input and input services

Total Turnover

 

6.Refund of Cenvat Credit to specified Service Providers [Rule 5B]

 

  • Eligibility: Service Provider providing services taxed on reverse charge basis

 

  • Condition: Unable to utilize credit of input/ input services on such output service

 

  • Scheme: Refund of credit allowed subject to conditions as specified

 

7.Restriction in availing credit (Rule 6)

 

Obligation of a) Manufacturer producing taxable and exempted goods and b) Service Provider providing taxable and exempted service.

 

Option A)      Maintain Separate accounts

 

Manufacturer of dutiable / exempted goods and Service provider of taxable/ exempted service to maintain separate accounts

 

Separate accounts to be maintained for

Inputs / Input services used in

Dutiable goods

Exempted goods

Taxable Services

Exempted services

 

 

 

 

 

 

Credit of

Nature of Output Service

Nature of Output Goods

Credit Allowed

Input/ Input Service

Exempted Service

Exempted Goods

NO

Taxable Service

Dutiable Goods

YES

 

 

Option B)      Not maintaining separate accounts

  • Rule 6(3)(i)          :-          6% of Value of Exempted goods/ Exempted services / Abated value, or,

 

  • Rule 6(3)(ii)         :-          Amount as per 3(A) ( proportionate credit) or,

[refer note at the end  Additional Conditions- Proportionate payment]

 

  • Rule 6(3)(iii)        :-          Maintain separate accounts for inputs and pay amount as per 3A (proportionate credit) for input services

 

Explanations:

  • Option to be exercised for “all” exempted service provided or “all” exempted goods manufactured

 

  • Option once exercised can’t be withdrawn during the financial year

 

  • No Cenvat of input or input service used exclusively in exempted goods / for exempted service.

 

  • No Cenvat is allowed of goods or services that are not inputs or input services.

 

Additional Conditions- Proportionate payment Rule 6(3)(ii)

 

Intimation to Superintendent of following particulars in case of option of proportionate payment:

(i) Name, address and registration No. of the manufacturer of goods or provider of output service;

(ii) Date from which the option under this clause is exercised or proposed to be exercised;

(iii) Description of dutiable goods or output services;

(iv) Description of exempted goods or exempted services;

(v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition.

 

Provisional Payment

Monthly payment of following amounts

  • Cenvat of inputs used in exempted goods= A

(+)

  • Cenvat of inputs used in exempted services=

 

Exempted service in PY  x (Credit on inputs taken during the month - A)

(Dutiable Goods + Output Services + Exempted Services) in PY

 (+)

  • Cenvat of input services used in exempted goods / Services =

 

Exempted Goods/Services in PY x (Input service credit during the month)

(Dutiable /Exempted Goods + Output /Exempted Services) in PY

(Note: PY = Previous Year, FY = Current Financial year)

 

Payment at year end

  • Cenvat of inputs used in exempted goods= B

(+)

  • Cenvat of inputs used in exempted services =

Exempted service in FY  x (Credit on inputs in FY– B)

(Dutiable Goods + Output Services + Exempted Services) in FY

(+)

  • Cenvat of input services used in exempted goods / Services  =

 

Exempted Goods/Services in FY x (Credit on input services in FY)

(Dutiable /Exempted Goods + Output /Exempted Services) in FY

 

 Difference in Provisional and Year end amount

  • Short Payment: Difference (Year end amount - Provisional Amount) is to be paid by 30th June of the end of the FY and in case of delay interest @ 24% pa is to be paid.

 

  • Excess Payment: Difference (Provisional amount – Year end amount) can be adjusted by taking credit.

 

  • Intimation to Superintendent within 15 days of such payment /adjustment.

 

 

Miscellaneous

  • In case of Trading  Value = Difference between sale price and purchase price or 10% of cost of goods

 

  • Failure to pay amount specified (monthly or at year end) by the person opting not to keep separate accounts will be recovered as Cenvat Credit wrongly taken.

 

  • No provisional amount to be paid monthly if no dutiable goods/taxable services are provided in PY and only final amount at year end is to be paid by 30th June of the succeeding year. This necessarily applies in the first year of operation or first year of taxability.

 

Non reversal of Credit

 

  • No Credit of Capital goods used exclusively for the exempted goods/ exempted services. [6(4)]

 

  • No reversal of credit in case of excisable goods removed without payment of duty to unit in SEZ, developer of SEZ, 100% EOU etc. [6(6)]

 

  • No reversal of credit in case of services provided without payment of tax to unit of SEZ or developer of SEZ or export of service. [6(6A)]

More details about CENVAT Credit