Welcomes you all 28.09.2004

chennai – coimbatore – bangalore - hyderabad An insight into … CENVAT CREDIT RULES, 2004 by swamy associates chennai – coimbatore – bangalore - hyderabad

Features Hitherto… Manufacturers were claiming credit of duties paid on inputs and using it for payment of their excise duty liability on their final products. Service providers were claming credit of service tax paid on their input services and using it for payment of their service tax liability on the services rendered by them. Hereinafter … If you are a manufacturer, Service Tax paid on input services, can be adjusted against your excise duty liability. If you are a service provider, Excise duties paid on inputs can be adjusted against your service tax liability.

Let us understand certain important terms

Inputs In case of manufacturers : All goods, except Diesel and Petrol used in or in relation to the manufacture of the final products whether directly or indirectly whether contained in the final product or not. In case of service providers : used for providing output service.

Capital goods Goods falling under Chapters 82, 84, 85, 90, 6802 and 6801.10. (b) Pollution control equipment. (c) Components, spares and accessories of the above. (d) Moulds, dies, jigs and fixtures. (e) Refractories and refractory materials. (f) Tubes, pipes and fittings thereof. (g) Storage tank. Used in the factory of manufacture of the final products Or for providing output service. Motor vehicle is declared as capital goods for certain categories of service providers.

Input service Any service Used by a service provider for providing output service. Used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and their clearance from the place of removal including certain specified services.

Output service Any taxable service for which a service provider is liable for payment of service tax. At present Service tax is liable on the following services.

First Stage Dealer A dealer who purchases the goods directly from the manufacturers / manufacturers’ depot / consignment agent of the manufacturer – under the cover of an invoice. Second Stage Dealer A dealer who purchases the goods from a First Stage Dealer.

Input Service Distributor Office of the manufacturer / output service provider. Head office, Corporate office, Administrative office, etc. - Which is receiving invoices for input services. ISD – To distribute the service tax paid by them, to its various manufacturing premises (in case of manufacturing units) or to its various premises from where output services (in case of service providers) are rendered.

A little more peep into the ISD No requirement of registration, as of now. Should raise invoices to its various constituents (factories or service rendering premises, as the case may be) – to distribute the Service tax paid by it, on input services. Shall maintain adequate records. Shall file an half yearly return – regarding credit received and distributed. The total amount distributed shall not exceed the service tax paid by the ISD. If the service tax paid by the ISD is exclusively in relation to manufacture of exempted goods or rendering of any exempted service, such service tax shall not be distributed. No norms for distribution.

Certain Important procedural requirements Credit on inputs can be taken immediately. Credit of Service Tax can be taken, only after making the payment for the bill. Credit available as at the end of the month/quarter alone can be used for payment of duty for the month/quarter, as the case may be. If credit is availed on capital goods, the duty portion should not be capitalised, for claiming depreciation.

What are the duties / taxes, for which credit facility is available? Cenvat Duty (Basic Excise Duty). Special Excise Duty (SED). Additional Duty of Excise (Textiles and Textile Articles) {AED(TTA)}. Additional Duty of Excise (Goods of Special Importance) {AED(GSI)}. National Calamity Contingent Duty (NCCD). Additional Duty of Excise on Tea and Tea Waste. Additional Duty of Customs (CVD). Education Cess on Excise Duties. Service Tax Education Cess of Service Tax.

chennai - coimbatore - bangalore - hyderabad THANKS s. jaikumar - g. natarajan - m. karthikeyan swamy associates chennai - coimbatore - bangalore - hyderabad mail@swamyassociates.com