TaxTMI 
TaxTMI 
TaxTMI 
Dear Professional Colleague,
Amendment in distribution of Cenvat Credit by ISD from 1st April, 2014
The CBEC vide Notification No. 05/2014-Central Excise (N.T.) dated February 24, 2014 (“the Notification”) has amended Rule 7 of the Cenvat Credit Rules, 2004 (“the Credit Rules”), which would come in to force w.e.f. April 1, 2014 and summarized as under:
Rule | Old Provision | Amended Provision | Effect |
The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely: - | The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely: - | No Change | |
the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; | the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; | No Change | |
Credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. | Credit of service tax attributable to service “used by one or more units” exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. | Services used by more than one unit exclusively engaged in exempted goods or exempted services shall not be distributed | |
Credit of service tax attributable to service used wholly in a unit shall be distributed only to that unit. | Credit of service tax attributable to service “used wholly by a unit” shall be distributed only to that unit. | Credit used wholly by a unit to be distributed to that unit only | |
Credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units to which the service relates during the same period. | Credit of service tax attributable to service used by more than one unit shall be distributed pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all its units, which are operational in the current year, during the said relevant period.
| Common input services credit to be distributed between such units which are operational in the year of distribution during the relevant period.
| |
Explanation 1 to Rule 7 | For the purposes of this rule, ―unit‖ includes the premises of a provider of output service and the premises of a manufacturer including the factory, whether registered or otherwise. | For the purposes of this rule, ―unit‖ includes the premises of a provider of output service and the premises of a manufacturer including the factory, whether registered or otherwise. | No Change |
Explanation 2 to Rule 7 | For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5. | For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5 | No Change |
Explanation 3 to Rule 7 |
|
| Change in Definition of relevant period.
Open Issue: Assessee will not be able to distribute credit till the time details of turnover of all the units are available. |
Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.
Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
F-30/31/32, Pankaj Grand Plaza
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