WHAT IS AVAILMENT?Meaning: Recording the credit – statutory books Results – increasing the balance – Cenvat
Credit Once Credit taken/ availed – ELIGIBLE FOR
UTILIZATION
WHAT IS UTILIZATION?Meaning: Using Credit availed – for payment of duty/
service tax Results in decrease of Credit balance. Reversal: when credit taken wrongly
BASIC CONDITIONS (Eligibility)? There should be:
Manufacture provision of taxable output service
Goods (Inputs/ Capital) and Services: eligibleCredit – available: duties/ taxes and paidNo credit – final product - Exempt/ not taxableCredit – available – specified documents only.
CENVAT CREDIT
FUND
utilized for payment of
Any DUTY on ‘any final Product’ Service tax on ‘ specified output service’
CENVAT CREDIT Allowed to/ Applies on:
Duty/ tax/cess
Goods: Input serviceInput/ capital
Manufacturer provider of output service
CENVAT CREDIT [Rule 3 (1)]Allowed of:
Excise Duty of Excisable GoodsAdditional Duty of Customs paid (imported
goods)Service Tax leviable – taxable servicesNCCD
CENVAT CREDIT Excise Duty: Basic Excise Duty Education CessSecondary and Higher Education Cess
Additional Duty of Customs:U/s 3 (1): Countervailing Duty (CVD)- equitable to
BED U/s 3 (5): Special CVD (counter balance- Sales tax/
VAT) Note: not available to Service Provider
Example: M/s AJ imported some inputs Basic Custom Duty: Rs.5,00,000 Surcharge: Rs.50,000 CVD: Rs.1,00,000 (U/s 3 (1):- 90,000)
(U/s 3 (5):- 10,000)Calculate amount of Cenvat Credit available, ifa) As a manufacturerb) As a service provider
Solution: If as a manufacturer: Credit: CVD + Special CVD = Rs. 1,00,000
If as a service provider:Credit: CVD (No SCVD)= Rs.90,000
Inter-changeability of Credit (Rule 3 (4))
Any duty, tax – can be used for credit.Payment of NCCD – can be used – balance of EC/
SHEC = NOT VICE VERSA.Cess on excise tax and service tax- can be used
interchangeability.Interchangeability – can used for same –
QUARTER/ MONTH of payment.
EXAMPLE 1: Service Tax credit – availed on input services For the period 01-07-2012 to 04-07-2012Can credit be taken for the quarter ending June ’12?
EXAMPLE 2: Can credit be used for payment of interest/penalty
and fine?
Solution 1: No.Credit cannot be taken for the quarter ending June 2012, provided used for the quarter ending 30th June 2012.
Solution 2: No.Credit cannot be used for payment of interest/penalty and fine.Reason: Used only – payment of duty on final product/ Service tax on services.
REVERSAL OF CREDIT
• Credit taken – as soon as inputs are received in factory or input services paid for.
SITUATION 1• Manufacturer – manufacture both – exempted and
taxable goods.• Service Provider: provides exempted and taxable
servicesEITHER PAY AMOUNT OR REVERSE PROPORTIONATE CENVAT CREDIT
EXAMPLE 1: Excise duty paid: Inputs goods: Rs.1,000
Capital goods: Rs.5,000 Service Tax Paid: Input Services: Rs.2,000 Excise Duty Paid: Rs.14,500 Goods manufactured: Rs.2,00,000 Out of Rs.2,00,000 (Rs.60,000 – exempted
Goods) Rate of Excise Duty: 10%
Solution 1:Cenvat Credit Utilized:
1,000 + 2,500 + 2,000 = Rs.5,500 Pay the Amount: Manufacturer: 5% of Rs.30,000 = Rs.1,500
OR Reverse the Proportionate Cenvat Credit:60,000/ 2,00,000 * 5,500 = Rs.1,650
REVERSAL OF CREDIT
SITUATION 2Rule 21 CE Rules: Reversal: if remission obtained on
duty payable on final product
Input Goods: are destroyed or unfit for consumption while in store
NO reversal – for Input Services and Capital Goods
REVERSAL OF CREDIT
SITUATION 3Rule 3 (5B): Cenvat Credit Rules: Reversal: obsolete
goods – partly or wholly written off
Required to pay amount equal to Cenvat Credit taken
If subsequently used – take credit of amount paid
NO REVERSAL OF CREDIT
SITUATION 1:In case of export/ deemed export or supplied - to UN Agencies or to EOU/ STP/EHTP/ SEZ. SITUATION 2:If duty paid – on final product – was actually not payable.