Method of determination of Cenvat Credit attributable to manufacturing of exempted goods and provision of exempted services - Rule 6(3A) of Cenvat Credit Rules 2004

[Surender Gupta]

Rule 6 of Cenvat Credit rules, 2004 has been amended to withdraw the facility of utilization of cenvat credit upto 20% of output service tax in case taxable and exempted services are being provided together without maintaining separate records.

Instead, a simple as well as complex method is introduced to deal with the situation. The amended facility is available to both i.e. the manufacture and the service provider. By following a simple method: -

Manufacturer shall pay 10% amount on exempted goods and Service Provider shall pay 8% amount on exempted services. [Sub Rule 3 of Rule 6]

By following complex method, as an alternate, the manufacturer or service provider shall find the credit attributable to exempted goods and exempted services are reverse the same. This exercise is to be done monthly on provisional basis and year on the basis of actual details. [Sub Rule 3A of Rule 6]

 

Month Wise Calculation - Provisional

Step One - Provisionally determine the CC attributable to Input used in manufacturing of Exempted Goods. It is to be done on actual basis without using any formula.

A	= Provisional determination of CC attributable to inputs used in exempted goods (Mfg.)

 

Step Two - Provisionally determine the CC attributable to inputs used in exempted services

B	= Value of exempted services provided during preceding FY
C	= Total Value of   Dutiable Goods + plus Taxable Services + plus Exempted Services (during preceding FY)
D	= CC taking taken on inputs during the month - (minus) A
	Provisional CC attributable to inputs used in exempted services (B / C) * D

 

Step Tree - Provisionally determine the CC attributable to inputs used in exempted goods and exempted services

E	= Total Value of Exempted Services + plus Exempted Goods + plus (during preceding FY)
F	= Total value of exempted and taxable and exempted services and total value of dutiable and exempted goods manufactured and removed (during preceding FY)
G	= CC taken on input services during the month
	Provisional CC attributable to inputs services used in exempted services or exempted goods (E / F) * G

 

For the whole financial year - Final Calculation

 

Step four - Final Determination of CC attributable to inputs used in exempted goods.

H	= Final determination of CC attributable to inputs used in exempted goods (Mfg.)

 

Step Five - Final determination the CC attributable to inputs used in exempted services

J	= Value of exempted services provided during current FY
K	= Total Value of   Dutiable Goods + plus Taxable Services + plus Exempted Services (during current FY)
L	= CC taking taken on inputs during the current FY - (minus) H
	Final CC attributable to inputs used in exempted services (J / K) * L

 

Step Six - Final determination of the CC attributable to inputs used in exempted goods and exempted services

M	= Total Value of Exempted Services + plus Exempted Goods + plus (during current FY)
N	= Total value of exempted and taxable and exempted services and total value of dutiable and exempted goods manufactured and removed (during current FY)
O	= CC taken on input services during the current FY
	Provisional CC attributable to inputs services used in exempted services or exempted goods (M / N) * P

Consequence of Final Determination:

1      Where the amount of CC after final determination is more than the amount paid monthly - The difference is to be paid on or before 30^th June, next year. For delayed payment, interest @24% shall be paid.

2       Where the amount of CC after final determination is less than the amount paid monthly - The difference is to be self adjusted.

3        Intimation shall be submitted with the Superintendent in the prescribed form within 15 days from the date of payment or adjustment.

Discussions to this article

[Subramani V]

Dear Sir, We are providing the software service (locan & export) and as aware of you which taxable (local)from 15.05.08. If possible can you please tell us with example for calculation of Month Wise Calculation - Provisional (we are confusion in determine step A) Thanks and best regards Subramani

[Mukesh Kumar]

I think, you should not confuse with the provisions. Export is not treated as exempted. However, are advised to obtain expert consultancy on the issue.