Basic concepts for input credit

By: Ch.KapilArticle assistant in Gella & Co

3/8/2014 [email protected]

Input Credit

VATExcise Duty and

Service Tax

Corresponding State Vat Act

Cenvat Credit Rules 2004

To Certify whether in accordance with Statutory Laws

In accordance

with


Where are they Defined…?Name of the Term Karnataka Vat Act,2003 Cenvat Credit Rules,2004

Manufacturer

Not Defined

A person who is liable to pay the duty of excise leviable on such goods under Rule 4 of the Central Excise (No. 2) Rules, 2001

Dealer

Any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration

First Stage Dealer means a dealer who purchases the goods directly from

Second Stage Dealer means a dealer who purchases the goods from a first stage dealer

Input

Means any goods including capital goods purchased by a dealer in the course of his business for re-sale or for use in the manufacture or processing or packing or storing of other goods or any other use in business


Name of the Term

Karnataka Vat Act,2003 Cenvat Credit Rules,2004

Input CreditHas the meaning assigned to it in Section 10.

Capital Goods

For the purposes of Section 12 means plant, including cold storage and similar plant, machinery, goods vehicles, equipments, moulds, tools and jigs, and used in the course of business other than for sale

All goods falling under Chapter 82, 84, 85, 90, heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act Components, spares and accessories of the goods specified at (i) above;· Moulds and Dies; Refractories and refractory materials Tubes and Pipes and Fittings thereof Pollution Control Equipment and Storage Tank,Which are used in Manufacturing process and for office

…..Continued


Type of Trader

Availment of Input Credit

VAT Basis Excise Duty

Basis Service Tax

Basis

Manufacturer

Yes Tax Invoice

Yes Bill of Entry and Excise Invoice

Yes

Service Bill or

Payment Challan

Importer NA Yes Bill of Entry

Yes

First Stage Dealer

Yes Tax Invoice

No Excise Invoice

No

Second Stage Dealer

Yes No Excise Invoice

No

Availment of Input for Different Type of Traders


Input of VAT can be availed only Tax Invoice issued in accordance of Section 29 , Chapter IV of Karnataka Vat Act,2003

Input of Excise Duty can be availed only on the basis of Excise Invoice Issued in accordance with the Rule 11 of Central Excise Rules,2002 and Bill of Entry issued by the Customs Department for Clearance of Imported Goods.

Input of service tax can be availed on the basis if service bill issued by the service provider and on payment under Reverse charge mechanism

Statutory References for Basis of Cenvat Input

Accounting :Input Credit should

be accounted in separate ledger which is grouped

under Current Assets (AS-2, AS-

10)

Auditor’s Role: Amount

Confirmation Finding Ineligible

credit


Availment of Input Credit in case of Capital Goods : Input Credit of VAT on capital goods can be availed completely in the same Financial Year but the vat on the goods purchased for the Fixed Assets under progress should be availed under Section 11 of Karnataka Vat Act,2003

Input Credit of Basic Excise Duty for the capital goods should be availed 50% in the current Financial Year and rest in the Next Financial Year. But the Other Duty covered under Excise like Special Excise Duty, Additional Excise Duty, Counter Availing Duty, Education Cess, Secondary Higher Education Cess can be availed in the same Financial Year.

One exception for this is the goods which can be consumed within the same Financial Year can be availed 100%

What IFF.??The Amount of

excise duty missed out for Availment can be availed in any Financial

Year if not charged

depreciation under Section 32 of Income

Tax Act,1961 or charged to

Expenditure in Financials


Service Tax Input Credit

The amount of Service tax involved in Input services for the process of manufacturing goods or for providing services is allowed as input credit under Cenvat Credit Rules.2004 This include different services involved in this process like consultancy, professional, legal, technical, supply of manpower, works contract and import of services and services under RCM Amount paid under Voluntary compliance scheme can be availed as input credit

Accounting: Separate Ledger

selection for Cenvat Credit and

RCM Liability

Auditor’s Role:Check the Eligible

Credit and Ineligible Credit

and RCM Liability3/8/2014 [email protected]

Identification of Capital Goods vis-à-vis regular material Excise invoice indicate the corresponding good head. If not quoted easily identified from tariff headings shown in cbec.gov.in under excise reference

Cases where confusion arises in availment of cenvat credit service tax levied by “bank for transactions” service tax levied by “consultant” Excise duty passed on by “First stage Dealer” or second stage Dealer Excise duty on “ as such removal of goods” Excise duty of “ stock transfer invoice” VAT for computers used for accounting Excise and VAT for goods sent for “Job work” vat on stickers used for internal process like “Labelling, for work orders etc 3/8/2014 [email protected]

Case studies for discussion……….


Recovery of cenvat credit is made as per provisions of Rule 12 of cenvat credit rules,2004 and Section 11A and 11AB of Central Excise Act, 1944

Penalty of wrongly availed amount or Rs.10,000/- whichever is greater under Rule 13 of cenvat credit rules and Section 11AC of Central Excise Act, 1944

In case of VAT Simple interest of 18% per annum under section 36 of KVAT Act,2003


Can Contact me :Ph : 8892879593Mail me: [email protected]


Date post:	06-May-2015
Category:	Education
Upload:	chidurala-kapil
View:	167 times
Download:	4 times