Video Presentation: Changes in Cenvat Credit Rules, 2004 vide Union Budget 2016

[CA Bimal Jain]

Effective from April 1, 2016, there are various changes made applicable under the Cenvat Credit Rules, 2004 (“the Credit Rules”), with a view to simplify and rationalize the Credit Rules. The important changes have been discussed along with availment of Cenvat credit of Service tax paid on assignment of right to use of natural resources by the Government or Local Authority or any other person.

However, there are wide ramifications entangling the extent/ availment/ utilization of Cenvat credit and reversal required in terms of Rule 6 of the Credit Rules providing for reversal of Cenvat credit in respect of inputs and input services used in manufacture of exempted goods or for provision of exempted services. Further, ‘exempted services’ as defined in Rule 2(e) of the Credit Rules now shall include an activity, which is not a ‘service’ as defined in Section 65B(44) of the Finance Act, 1994.

The Credit Rules is duly amended/ clarified by following Notifications/ Circular as on date.

Notification/ Circular No.	Particulars
Notification No. 13/2016-CE(NT) dated March 1, 2016;	Amendment in the Credit Rules to make changes in various Rules/ Sub-rules of the Credit Rules.
Notification No. 23/2016-CE(NT) dated April 1, 2016	Rule 6(3) of the Credit Rules, amended to provide that the assessee can pay an amount equal to 6% of value of the exempted goods and 7% of value of the exempted services subject to sum total of opening balance of Cenvat credit of input and input services available at the beginning of the period, to which the payment relates and the credit of input and input services taken during that period. This amount initially proposed to be maximum of the total credit taken at the end of the period to which the payment relates;
Notification No. 24/2016-CE(NT) dated April 13, 2016	Rule 4(7) of the Credit Rules, amended to provide that the Cenvat credit of Service tax paid in a financial year, on the one-time charges payable in full upfront or in instalments, for the service of assignment of the right to use any natural resource by the Government, local authority or any other person, shall be spread evenly over a period of 3 years instead of over a period of right to use. Further, time limit of 1 year for availment of Cenvat credit on Input services is not applicable in case of services provided by Government, local authority or any other person, by way of assignment of right to use any natural resource.
Circular No. 192/02/2016-ST dated April 13, 2016	Clarification explaining how the Cenvat credit is to be availed on Service tax paid for assignment of right to use natural resources & taxability of Governmental services.

 

Now, in order to provide complete understanding of the above discussed provisions and corresponding changes brought vide mentioned Notifications/ Circular, Mr. Bimal Jain has recorded a video presentation titled “Changes in Cenvat Credit Rules, 2004 vide Union Budget 2016”, for easy digest. The video also captures the important changes with practical illustrations in PPT format, facilitating ease of understanding.

 

Discussions to this article

[ANIL ANIKHINDI]

It was very nice presentation. I appreciate CA Bimal Jain's efforts. Congratulations. ---

CMA (Dr.) Anil Anikhindi

[Chintamani Bhide]

An excellent effort to provide insight in new provisions of CCR. A commendable one !!!

Apart from the alarming points/open issues discussed in the video, one more point that comes to my mind and may be the cause of future litigation is - The deeming provision of treating Capital goods upto a value of ₹ 10000/- per piece as 'Input' will it not attract the clutches of Rule 6(3) ?