CENVAT CREDIT

[Guest]

we are a manufacturing unit. we produce both dutiable and exempted goods. Can we get cenvat credit??/if yes then what is the procedure

[YAGAY andSUN]

Dear Ranjit,

Please check Rule 6 of the CENVAT credit Rules, 2004 as amended from time to time in this regard as you would have to do one of the following

1. Maintain Separate books of accounts
2. Reverse the proportionate CENVAT credit
3. Pay an amount of 6% on the value of exempted goods when removed.

Regards,

YAGAY and SUN

(Management and Indirect Tax Consultants)

[Madhukar N Hiregange]

The separate books of accounts following cost accounting principles especially for the input services would be important. The capital goods used commonly would be eligible for 100% credit unless they are used exclusively for the manufacture of exempted goods

Otherwise follow separate records for inputs + proportionate for input services. Eligible credit x dutiable goods value/ dutiable + exempted goods.

Of course if the quantum of exempted goods is very low then reversing 6% credit may also be a good option.

AI Summary

Cenvat credit requires separate accounts, proportional reversal, or payment on removal; capital goods generally retain full credit. Manufacturers of both dutiable and exempt goods may claim Cenvat credit only by complying with Rule 6: maintain separate books of accounts, reverse proportionate credit attributable to exempted output, or make the stipulated payment on removal of exempt goods. Capital goods used commonly are generally eligible for full credit unless exclusively for exempt goods. For input services, either keep segregated records or apportion eligible credit by multiplying eligible credit by the ratio of dutiable goods value to total goods value; a payment option may be practical when exempt output is minimal.