CENVAT credit eligibility on KKC as a manufacturer (deemed Service provider i.e. Reverse change Machanism

[Yatin Bhopi]

Dear experts,

We are manufacturer and also liable to pay service tax under reverse charge mechanism on GTA, Works contract, Legal services etc. and also providing one service (receiving Intending commission from outside India) i.e. Business Auxiliary service. Now after 1^st June 2016 Krishi Kalyan Cess will be applicable to all services.

Below is the Para 3.1 of F. No. 334/8/2016-TRU dated 29.02.2016

Enabling provision for levy of “Krishi Kalyan Cess”: 3.1 Krishi Kalyan Cess (KKC) is proposed to be levied with effect from 1st June, 2016 on any or all the taxable services at the rate of 0.5% on the value of such taxable services. Credit of Krishi Kalyan Cess paid on input services shall be allowed to be used for payment of the proposed Cess on the service provided by a service provider.

In above clarification letter TRU is clarify that CENVAT credit will be available to the service provider.

My query is:

Since we are paying service tax on reverse charge basis (deemed Service provider) and also in Business auxiliary service (as a service provider) can CENVAT credit is available to us? (received on various input services used in relation to manufacturing activity)

AI Summary

Manufacturers Can't Use CENVAT Credit on Krishi Kalyan Cess for Reverse Charge Service Tax Payments, Experts Confirm A manufacturer, also liable for service tax under the reverse charge mechanism, inquired about the eligibility of CENVAT credit on Krishi Kalyan Cess (KKC) applicable from June 1, 2016. Experts clarified that CENVAT credit on KKC paid under reverse charge can only be used for KKC payment on output services. However, CENVAT credit cannot be used for service tax payment under reverse charge, as per existing regulations. The consensus was that manufacturers cannot utilize CENVAT credit on KKC, which is only available to service providers for offsetting KKC liabilities.