of 15
7/26/2019 [FAQ] _ Tally
1/15
FAQ-9 ( Excise for Manufacturers):
How to account purchase of capital goods and avail CEVATCredit? What is the procedure to adjust the CENVATCredit of Capital goods towards Service Tax liability?
Capital Goods:
Capital goods refer to the means of production. Individuals, organizations and governments use capital goods in
the production of other goods or commodities. Capital goods include factories, machinery, tools, equipment, andvarious buildings which are used to produce other products for consumption
As per Excise Act, on the purchase of Capital goods at any point of time in a financial year CENVAT credit shall beavailed to the extent of 50% of the Duty paid in the same financial year. The balance of CENVAT credit may beavailed in any financial year subsequent to the financial year in which the capital goods were received in the factoryof the manufacturer.
The CENVAT credit in respect of the capital goods shall be allowed to a manufacturer even if the capital goods areacquired by him on lease, hire purchase or loan agreement, from a financing company
The CENVAT credit in respect of capital goods shall not be allowed if the manufacturer claims depreciation on thatpart of the value of such capital goods that represents the amount of duty on such capital goods.
To take account purchase of capital goods and avail CEVAT Credit, follow the steps given below
Step 1: Create Stock Item (Capital Goods)
In F12: Configure (Stock Item Configuration)
Set the option Allow ADVANCED entries in Masters toYes
Go to Gateway of Tally > Inventory Info. > Stock Item > Create
Enter the Name of the capital goods- Machinery
Select the Stock Group, Unit of Measurement, Tariff Classification
Enable the option Set/Alter Excise Details toYes to provide excise details for the capital goods
7/26/2019 [FAQ] _ Tally
2/15
[7-56]
In Excise Detailsscreen, select the Excise Unit Name, Reporting UOM and enable the
option Set/Alter Duty Details toYes
In Excise Duty Details screen enter the duty applicable for the capital goods as shown below
7/26/2019 [FAQ] _ Tally
3/15
[7-57]
In Excise Details screen, select the option Capital Goods in Stock Item Type field
[7-58]
Press enter to save the stock item.
Step 2: Create Fixed Assets Ledger
Create Plant & Machinery ledger, group under Fixed Assets. Enable VAT option and select VAT/TaxClass Purchase Capital Goods @ 4%
7/26/2019 [FAQ] _ Tally
4/15
Step 3: Create Voucher Class for Debit Note
Go to Gateway of Tally > Accounts Info. > Voucher Types > Alter
From the List of Voucher Types select Debit Note
In the Debit Note Voucher tab down to Name of Class field
In the Name of Class enter the class name as CENVAT Availing
[7-59]
In the Voucher Type Classscreen set the option Use Class for Excise/CENVAT Adjustments toYes
[7-60]
Press Enter to save Voucher Type Class screen and Voucher Type Alteration screen.
Step 4: CreateVoucherClassinJournalVoucher
Go to Gateway of Tally > Accounts info. > Voucher Types > Alter > Journal
7/26/2019 [FAQ] _ Tally
5/15
Tab down to Name of Class field
Enter the Name of Class as CENVAT Credit Adjustmentand press Enter
In Voucher Type Class Screen
Set Use Class for Excise /CENVAT Adjustment toYes
[7-61]
[7-62]
Press Enter to accept and save.
Step 5:Record a Purchase Voucher
Record the purchase of Capital goods and select the Excise duty Ledgers to account the duty amount.
On capital goods purchases user can avail only 50% of the credit in current financial year and 50% should betransferred to current asset account. Currently there is no provision to avail partial credit and transfer the balance50% credit to control account in Purchase Voucher.
To satisfy all the above conditions, in purchase voucher select the Excise duty ledgers instead of CENVAT ledgersso that, the total excise amount gets allocated to the Fixed Asset Ledger. Later by recording a adjustment entry thecredit amount can be transferred to a control account to claim 50% credit in current financial year and remaining50% credit in subsequent years.
7/26/2019 [FAQ] _ Tally
6/15
The completed Purchase Voucher is displayed as shown
[7-63]
Step 6: Record Journal Voucher to transfer the eligible credit amount from Capital Goods (Fixed AssetLedger) to Current Asset ledger.
i. Create the Current Asset Ledger Available CENVAT Credit on Capital Goods
Debit - Available CENVAT Credit on Capital Goods ledger and in Amount field enter the total amount of
Eligible credit on capital goods
Credit Plant & MachineryLedger (to transfer the CENVAT Credit amount from the asset ledger) to view
Inventory Allocation screen
In Inventory Allocation screen
In Name of Item field select Machinery
In Amount field specify Rs.1,64,800 (the total credit available on the capital goods)
7/26/2019 [FAQ] _ Tally
7/15
[7-64]
Note: Quantity andRate details are not required.
Completed Journal voucher appears as shown
[7-65]
Step 7:Record a Debit Note (with CENVAT availing voucher Class) to avail 50% of credit in the currentFinancial Year.
Go to Gateway of Tally > Accounting Vouchers > Ctrl + F9: Debit Note
In Change Voucher Type screen in Class field select CENVAT Credit Adjustment from the Voucher Class
List
In Excise Unit field select ABC Company
In Nature of Purchase field select Manufacturer
7/26/2019 [FAQ] _ Tally
8/15
In Debit field select Basic Excise Duty (CENVAT) to view Excise Duty Allocation screen
In Excise Duty Allocation screen
o In Type of Ref select New Ref
o In Namefield enter the reference name used in the purchase voucher
o In Party Name field select Universal manufacturers from the List of Ledger Accounts
o In the Name of Item field select Machinery
o In Quantity field enter 1
o In the Assessable Value field enter Rs. 10,00,000
Note: As per law, only 50% of the duty paid on capital goods can be availed as CENVAT credit in the samefinancial year in which the capital goods is purchased. To calculate the partial CENVAT Credit here, enter the creditamount in Amount column.
o in the Rate field the rate of duty defined in the ledger will be defaulted (if the rate of duty is not
defined during ledger creation enter the applicable rate of duty)
o Enter the duty amount of Rs. 80,000 in Amount field
[7-66]
In Debit field selectEducation Cess (CENVAT) to view Excise Duty Allocation screen
In Excise Duty Allocation screen
o In Type of Ref select New Ref
o In Namefield enter the reference name used in the purchase voucher
o In Party Name field select Universal manufacturers from the List of Ledger Accounts
o In the Name of Item field select Machinery
o In Quantity field enter 1
o In the Assessable Value field enter Rs. 80,000
7/26/2019 [FAQ] _ Tally
9/15
[7-67]
Similarly, select Secondary Education Cess (CENVAT) and provide the excise details as shown
[7-68]
In Credit field, select Available CENVAT Credit on Capital Goods and press enter to view Excise Duty
Allocation screen
In Excise Duty Allocation screen
o Select Agst Ref in Type of Ref field
o In Name field select bill Si/125/09-10 dated 17-5-2009 (Basic Excise Duty @ 16%) from the List of
Pending Tax Bills
o In the Amount field enter Rs.80,000 (is the amount which is availed as CENVAT Credit against
the Basic Excise Duty)
o Select Agst Ref in Type of Ref field
o In Name field select bill Si/125/09-10 dated 17-5-2009 (Education Cess @ 2%) from the List of
Pending Tax Bills
o In the Amount field enter Rs.1,600 (is the amount which is availed as CENVAT Credit against the
Education Cess)
o Select Agst Ref in Type of Ref field
o In Name field select bill Si/125/09-10 dated 17-5-2009 (Secondary Education Cess @ 2%) from the
List of Pending Tax Bills
o In the Amount field enter Rs.800 (is the amount which is availed as CENVAT Credit against the
Secondary Education Cess)
The Excise Duty Allocation screen appears as shown
7/26/2019 [FAQ] _ Tally
10/15
[7-69]
Amount will be defaulted automatically
The completed Debit Note voucher is displayed as shown
[7-70]
Step 8: Record the Sale of Services (Sales Voucher)
Record the sales of services (ensure the required ledgers are created with appropriate settings)
7/26/2019 [FAQ] _ Tally
11/15
[7-71]
Step 9: Record the Receipt of Payment (Receipt Voucher)
In case of Service Tax, liability to pay service tax arises only on the receipt of payment from the customer.
[7-72]
On receipt of payment from the customer the service tax payable amount will be displayed in the Service TaxPayable (Bill-Date Wise) report
[7-73]
7/26/2019 [FAQ] _ Tally
12/15
Step 10: Record a CENVAT Adjustment Journal to adjust the CENVAT Credit of Capital Goods towardsService Tax Payable
ABC Company adjusts full amount of Service Tax Payable i.e. Rs. 51500 (Service Tax of Rs.50000, EducationCess of Rs. 1000 and Secondary Education Cess of Rs. 500) towards CENVAT Credit of Capital Goods.
To pass a CENVAT Adjustmententry, go to Gateway of Tally > Accounting Vouchers > F7: Journal
In Change Voucher Typescreen, select CENVAT Adjustment in Class field.
[7-74]
In Used For field select the option CENVAT Adjustment from Excise Adjustments list
[7-75]
In Excise Unit field, select ABC Company
In Debit field select Output Service TaxLedger and press enter to view ServiceTax Bill Details screen
In Type of Ref field select Agst Ref and select Sales/1-1 bill to adjust the full amount of Rs 51,500
7/26/2019 [FAQ] _ Tally
13/15
[7-76]
In Credit field select Basic Excise Duty (CENVAT) and press enter to select excise bills
In Excise Duty Allocation screen
o Type of Reffield will be defaulted to Agst Ref
o In Namefield select the bill towards which the service tax to be adjusted select Si/125/09-10 bill
(purchase bill name of Capital Goods)
[7-77]
o In Amount field mention Rs 50,000 to adjust towards Service Tax
7/26/2019 [FAQ] _ Tally
14/15
[7-78]
o Select End of List and save the Excise Duty Allocation screen
In Credit field select Education Cess (CENVAT) and select Si/125/09-10 and enter Rs.1000 to adjust
towards Education Cess on Service Tax
Similarly, in Credit field select Secondary education Cess (CENVAT) and select Si/125/09-10 and
enter Rs.500 to adjust towards Secondary Education Cess on Service Tax
Set the option to Provide Details toYes to enter the Adjustment Period
[7-79]
The completed CENVAT Adjustment Journal Voucher appears as shown
7/26/2019 [FAQ] _ Tally
15/15
[7-80]