Cenvat Credit - A fortunate paradigm shift! ?

[Meet Jain]

3^rd, March, 2014

Union Budget 2015-16 set a one year time limit from date of invoice for taking CENVAT Credit, previously which was six months from date of invoice as a measure of business facilitation.

Until 1 September 2014, there was no time limit for claiming CENVAT credit on inputs and input services received by manufacturers or service providers. In case of inputs, credit could be claimed once goods entered the factory premises and in case of input services, credit could be claimed on receiving the invoice.

However, a time limit of six months to claim Cenvat Credit from the date of issue of documents issued under Rule 9(1) of CCR,2004 i.e., Invoice, bill of entry, challan, etc. on inputs and input services has been revised to 1 year from such date under Budget of 2015-16 via Notification No 06/2015-CENT.

Furthermore, CBEC vide Circular No. 990/14/2014-Cx-8 reduced ambiguities in following way:

• CENVAT credit on input services is to be reversed if payment is not made to the service provider within three months of the date of invoice; however, CENVAT credit can be re-availed once the payment is made;
• CENVAT credit is to be reversed if the value of inputs is written off before being used; however, credit can be re-availed when the inputs are used;
• CENVAT credit on inputs cleared to job workers is to be reversed if the inputs are not returned within the prescribed time limit; however, credit can be re-availed once the processed goods are received.

Thus, the purpose of the amendment is to ensure again that credit is claimed for the first time within a period of one year from the date of issue of documents under Rule 9(1). It would not apply for taking re-credit of amount reversed, after meeting the conditions prescribed in these rules.

Accordingly, a business must be cautious at the time of claiming CENVAT Credit and hence, is a good step entrusting the industry’s environment removing consequences of time limit.