25 March 2011 1
E3E3--E4 FINANCEE4 FINANCE
Mandatory Training Mandatory Training
ProgrammeProgramme
CENVAT CREDIT
For Internal Circulation of BSNL Only
25 March 2011 2
WELCOME
This is a presentation for the E3-E4
(Finance) Core Module for the Topic:
Cenvat credit .
Eligibility: Those who have got the Up
gradation from E3 to E4.
This presentation is last updated on 21-3-
2011.
You can also visit the Digital library of
BSNL to see this topic.
For Internal Circulation of BSNL Only
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AGENDA
Concept of VAT
Concept of CENVAT credit
BSNL instructions on CENVAT credit
For Internal Circulation of BSNL Only
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CENVAT
Cenvat has
its origin in
the system of
VAT.
For Internal Circulation of BSNL Only
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BASIC CONCEPT OF VAT
A tax that applies to most business transaction that
involves the transfer of goods or services.
VAT replaces the Sales Tax imposes by State
Government.
A tax on the value addition.
Remove defect in tax system.
Good and transparent tax collection system.
VAT to avoid the cascading effect.
VAT & CENVAT exist and operate in parallel manner.
For Internal Circulation of BSNL Only
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CENVAT CREDIT
MODVAT 1986 - applicable for
manufacturers.
1994 - MODVAT 1986 extended to capital
goods.
2001 - MODVAT scheme rechristened to
Cenvat credit rules.
2002 - Cenvat credit rules simplified and
reviewed.
10-09-2004: Cenvat rules 2004 issued.
For Internal Circulation of BSNL Only
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CONCEPT OF CENVAT CREDIT
Grant credit of specified duties paid on
capital goods, inputs & input
services to the service provider.
Credit is utilized for payment of service tax
on output service.
Credit is available only when the output
service is taxable.
For Internal Circulation of BSNL Only
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Capital
Goods
Input
Goods
Input
Services
Various
Services
For Internal Circulation of BSNL Only
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SPECIFIED DUTIES FOR CENVAT CREDIT
Basic Excise Duty and corresponding CVD
on imported goods.
Special and Additional Excise Duty
National Calamity Contingent duty
EC and SAH on the above.
Service tax on input service.
EC and SAH on the above.
For Internal Circulation of BSNL Only
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EXCLUSION OF DUTIES
Basic Customs duty.
Special Customs duty.
Special additional duty under customs.
Education cess paid in aggregate Customs
duty.
Secondary & Higher education cess on
Customs duty.
For Internal Circulation of BSNL Only
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CAPITAL GOODS [RULE 2(A)]
The following items used for providing
output service:
(a) All goods falling under chapter 82,
chapter 84, chapter 85, chapter 90,
heading No.6805, grinding wheels and
the like, and parts thereof falling under
heading 6804 of the first schedule to the
Excise Tariff Act.
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CAPITAL GOODS [RULE 2(A)]
(b) Pollution control equipment
(c) Components, spares & accessories of the
goods at (a) & (b) above
(d) Moulds and dies, jigs and fixtures
(e) Refractory and refractory materials
(f) Tubes and pipes and fittings thereof
(g) Storage tank
For Internal Circulation of BSNL Only
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CAPITAL GOODS [RULE 2(A)]
(h) Motor vehicles in respect of certain services:
Cargo handling Agency’s service
Courier Agency’s service
Outdoor caterer’s service
Pandal or shamiana contractor’s service
Tour operator’s service
Transport of goods by road service (GTA)
For Internal Circulation of BSNL Only
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CAPITAL GOODS
Up to 50% credit can be availed in first year and
balance in subsequent years.
Depreciation should not be claimed on the
excise portion of the capital goods.
Capital goods obtained on hire
purchase/lease/loan are eligible for credit.
For Internal Circulation of BSNL Only
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Capital CAPITAL GOODSGoods
• Capital goods should be used for providing
output service.
• Duration is not specified. Hence , if the capital
goods are used for one day, Cenvat eligibility
is established as they are used.
• Credit can be taken when the capital goods
are received in the premises of provider of
output service.
.
For Internal Circulation of BSNL Only
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INPUTS [RULE 2(K)]
The following goods used for providing
output service:
All goods, except light diesel oil, high speed
diesel oil, motor spirit, commonly known as
petrol and motor vehicles used for providing
any output service
For Internal Circulation of BSNL Only
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INPUT SERVICES
The benefit of CENVAT credit has been
withdrawn to GTA service under CENVAT
Credit scheme
For Internal Circulation of BSNL Only
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INPUT SERVICES
Mere payment of service tax to service
provider is not sufficient
Credit of Cenvat only after payment is made
to service provider
For Internal Circulation of BSNL Only
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EXEMPTED OUTPUT SERVICES [RULE 6]
Capital goods used exclusively for
providing exempt service are not eligible for
Cenvat credit. If capital goods are partly used
for taxable services Cenvat credit will be
available.
For Internal Circulation of BSNL Only
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EXEMPTED OUTPUT SERVICES [RULE 6]
As per Rule 6(5) of Cenvat Credit Rules 2004,
Certain services even if they are partly used
in exempted services, entire credit will be
available for utilization to the service
provider.
For Internal Circulation of BSNL Only
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EXEMPTED OUTPUT SERVICES [RULE 6]
Option to service providers when no separate
accounts are maintained for input and input
services-
1. Pay 6% on exempted services
or
2. Amount equivalent to cenvat credit
attributable to inputs and input services
used in exempted services( provisionally
every month)
For Internal Circulation of BSNL Only
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NOTIFIED DOCUMENTS FOR AVAILING CENVAT CREDIT
[RULE 9(1)]
1. An invoice issued by -
(a) a manufacturer for clearance of
input goods or capital goods.
(b) an importer.
(c) a first stage dealer or second stage
dealer.
2. Supplementary invoice issued by
manufacturer or importer.
For Internal Circulation of BSNL Only
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NOTIFIED DOCUMENTS FOR AVAILING CENVAT CREDIT
[RULE 9(1)]
3. A bill of entry.
4. A certificate issued by an appraiser of
customs for goods imported through a
foreign post office.
5. An invoice or bill or challan issued by
input service provider.
6. An invoice, bill or challan issued by input
service distributor.
For Internal Circulation of BSNL Only
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RETURNS
Form ST-3: Half yearly return within one
month from close of half year, by provider of
output services.
Form ST-3: Half yearly return within one
month from close of half year, by Input
service Distributor.
For Internal Circulation of BSNL Only
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CONFISCATION AND PENALTY
If Cenvat credit is taken wrongly or
without taking correctly, penalty will be the
amount not exceeding the duty on the
excisable goods or Rs.10,000/- whichever is
greater.
For Internal Circulation of BSNL Only
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BSNL INSTRUCTIONS
Cenvat credit can be availed by all revenue
earning SSAs/Units having service tax
registration number.
Others can avail Cenvat credit by passing the
net debit balance to the nominated “Nodal
Offices” through ATD.
For Internal Circulation of BSNL Only
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BSNL INSTRUCTIONS
All non-revenue earning circles/units like
Project, Maintenance, Q&A, Data net works,
Civil, Electrical, Store depot, Adm offices etc
may get registered with Service Tax
authorities as Input Service Distributor.
Invoice along with ATD are issued.
Half yearly return in Form ST-3 is filed.
For Internal Circulation of BSNL Only
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BSNL INSTRUCTIONS
Availing of Cenvat credit by SSA/Units on capital goods/input received from CTSDs.
CTSDs have to register as 1st Stage or 2nd
Stage dealer with Central Excise/ Service Tax
authorities.
In such case CTSD can issue
invoice/challan, on the basis of which unit can
avail Cenvat credit.
For Internal Circulation of BSNL Only
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REMOVAL OF INPUT, CAPITAL GOODS AND WASTE
The inputs or capital goods can be removed as such from the premises of service provider on payment of an amount equal to Cenvat credit availed when the credit was taken
If capital goods on which Cenvat is availed are cleared as such (i.e. without use) an amount equal to Cenvat credit availed is required to be paid
If capital goods are sold as scrap, an amount equal to duty payable on scrap value of capital goods is payable
For Internal Circulation of BSNL Only
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EFFECT OF CENVAT ON THE TRANSFER OF CAPITAL GOODS
[PROVISO UNDER RULE3(5)]
If capital goods on which Cenvat credit has
been taken, are removed after being used,
the provider of output service shall pay an
amount equal to the Cenvat credit taken on
the said capital goods reduced by 2.5% for
each quarter of a year or part thereof from
the date of taking the Cenvat credit.
For Internal Circulation of BSNL Only
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CENVAT CREDIT ON TENDER EVALUATION
The evaluation and comparison of
responsive bids shall be done on the basis of
the net cost to BSNL on the price of the
goods offered inclusive of duties and taxes
(but excluding Cenvat –able duties and
taxes), sales tax, packing, forwarding, freight
and insurance charges.
For Internal Circulation of BSNL Only
25 March 2011 32For Internal Circulation of BSNL Only