CENVAT CREDIT

Presented By: Minal Maru M-12-32

Zui Mhatre M-12-33

Aniruddha Mokashi M-12-34 Vishakha More M-12-35 Bharti Nagdeo M-12-36 Niket Naik M-12-37

Introduction

Principle of CENVAT (central value added tax)

It has its origin in the system of VAT, which is common in West European countries VAT was found to be a very good and transparent tax collection system which increases tax revenue

MODVAT (modified value addad tax) was inroduced in India in 1986 and was later re-named as CENVAT in 2000.
CENVAT considers the duty paid on the input which he had absorbed as part of the purchase price when buying the same for producing finished products.

ELIGIBILITY FOR CENVAT CREDIT

All goods (except HSD, LDO and petrol) used in, or in relation to the manufacture of final products The input may be used directly or indirectly in manufacture of final product. It need not be present in the final product Setting up, modernization, renovation or repairs of factory, premises of provider of output service or an office Advertisements or sales promotion, market research, storage upto the place of removal, procurement of inputs Tools, hand tools, knives, electrical machinery, measuring ,checking and testing machines etc. Pollution control equipment, moulds and dyes, tubes, pipes, storage tanks etc.

Input goods eligible for CENVAT credit

Input services eligible for CENVAT credit

Capital goods eligible for CENVAT credit

Basic Condition
Excisable goods are manufactured or taxable services are provided. Excise duty paid on input goods and on capital goods and service tax paid on input services is Cenvat credit, subject to certain limitations/ restrictions. Cenvat credit is available for payment of excise on manufactured goods or services tax on output services, subject to restriction as specified. Credit is not available if the final product is exempt from excise duty or output services is not taxable. Credit is available on the basis of specified documents only.

About the Question

Globast Food processing Ltd is in the manufacture of Tomato powder and certain nutritional powders Information is given about various input, input services and capital goods Determine: CENVAT credit to be availed on the given inputs.

Eligible Items
Eligible Tomato powder Tomato puree Certain Chemicals Nutritional Powder No No Yes Yes Credit Availed 100% 100%

Maltodoxin Powder Packing Material

Statutory and Tax Audits Payment for Security Services Recruitment services for different departments Fees to Consultant Car for Benefit of Employees Canteen Facility at Concessional Rate Free fruits and Beverages Machinery Purchased

Yes Yes
Yes Yes Yes No No Yes No Yes

100% 100%
100% 100% 100% 100% 50%

Credit Availed on Purchases

Pool of Credit Excise Duty Utilisation Credit can be utilised only for payment of excise duty or service tax on final product or output service. Credit can be utilised only for payment of educational cess on final product or output service. Credit can be utilised only for payment of secondary and higher educational cess on final product or output service.

Education cess on excise duty

Secondary and higher education cess on excise duty

Credit Availed on Services

Pool of Credit Service tax on input service Utilisation Credit can be utilised only for payment of excise duty or service tax on final product or output service. Credit can be utilised only for payment of educational cess on final product or output service.

Education cess on service tax

Secondary and higher education cess on service tax

Credit can be utilised only for payment of secondary and higher educational cess on final product or output service.

Assumptions
Total excise duty payable: Rs.5,50,000 Total service tax payable: Rs.15,000
Rate of Service tax: 10% Values of different Purchases and services.

Assumptions
Value Rate of Rate of (Assumed) Excise duty Service tax (Assumed) Certain Chemicals Nutritional Powder Maltodoxin Powder 5,00,000 10,00,000 2,00,000 12% 12% 12% Amount of Excise duty 60,000 1,20,000 24,000 Amount of Service tax -

Packing Material Statutory and Tax Audits

Recruitment Services Canteen Facility at Concessional Rate Machinery Purchased

1,00,000 50,000
30,000 4,00,000 25,00,000

12% 12% (Assumed)

10%
10% 10%

12,000 3,00,000

5,000
3,000 4,000 -

CENVAT Credit Available

Pool of Credit Basic excise Duty Service tax Education cess Secondary n higher education cess 600 1,200 240 120 50 30 40 1,500 3,780

Certain Chemicals Nutritional Powder Maltodoxin Powder Packing Material Statutory and Tax Audits Recruitment Services Canteen Facility at Concessional Rate Machinery Purchased (@ 50%) Total CENVAT credit available

60,000 1,20,000 24,000 12,000 1,50,000 3,66,000

5,000 3,000 4,000 12,000

1,200 2,400 480 240 100 60 80 3,000 7,560

Duty/Tax Payable
Basic excise duty Education cess Secondary and higher education cess

Excise duty
Service tax Total Less: Cenvat credit Net amount payable

5,50,000
15,000 5,65,000 3,78,000* 1,87,000

11,000
300 11,300 7,560 3,740

5,500
150 5,650 3,780 1,870

*Rs.3,66,000 + Rs.12,000