RULE 2(l) OF CENVAT CREDIT RULES, 2004 amended

Vide Notification NO.10/2017-CE (NT), dated 13.04.2017 the Central Government made the rules further to amend the CENVAT Credit Rules, 2004.

This Notification amended Rule 2(l), Rule 4(7) and Rule 9.

Rule 2 provides for substitution in Rule 2(l) of CENVAT Credit Rules, 2004.  After this substitution the definition of ‘input service’ got changed.  The amended definition is as below-

2(l) – ‘input service’ means-

(i) services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India where service tax is paid by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the said taxable services and the said imported goods are his inputs or capital goods; or

(ii) any service used by a provider of output service for providing an output service; or

(iii) any service used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal,

and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes,-

(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for –

(a) construction or execution of works contract of a building or a civil structure or a part thereof; or

(b) laying of foundation or making of structures for support of capital goods,   except for the provision of one or more of the specified services; or

(B) services provided by way of renting of a motor vehicle], in so far as they relate to a motor vehicle which is not a capital goods; or

 (BA)  service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods,  except when used by-

(a) a manufacturer of a motor vehicle in respect of  a motor vehicle manufactured by  such person ; or

(b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or

(c) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;”

Explanation.-For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis.

The substitution gives additional definition to input services for the services provided in non taxable territory to a person located in non taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.  The said imported goods will be eligible as his inputs or capital goods for taking credit.

Rule 4 provides the conditions for allowing CENVAT credit.  A proviso has been inserted after the second proviso to Rule 7(4) which reads as follows-

 Provided also that in respect of services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India where service tax is paid by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the said taxable services, credit of service tax paid by the person liable for paying service tax shall be allowed after such service tax is paid.

Rule 2(l) makes eligible the imported goods as inputs or capital goods.  Third proviso (newly inserted) allows the imported goods to take credit of service tax paid.

Rule 9 provides the documents and accounts for taking credit.  The amendment adds one more document for the above said purposes.   After Rule 9(1) (e), sub-clause (ea) has been inserted which reads as follows-

(ea) a challan evidencing payment of service tax by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India; or

These new amendments came into effect from 23.04.2017.  The GST is on the move and is expected to be implemented by 01.07.2017.  In such a situation this amendment has been brought into, which will long lost for a short period.