CENVAT credit on small capital goods (value below 10000)

[Yatin Bhopi]

Dear expert,

From 1st April 2016 definition of input includes all capital goods which have a value upto ten thousand rupees per piece hence we are eligible to avail 100% CENVAT credit input in first year only.

If in one invoice there are few capital goods which value is below 10000\piece and some capital goods have value more than 10000. Now my query is:

Are we need to take credit partly in capital goods and partly in input? If this is true then it will create lot of problem in availing CENVAT, record keeping and accounting of bills.

Please share your valuable views

[KASTURI SETHI]

Yes. You have to take credit partly in capital goods account and partly in input credit account. Although I have not commerce background, yet I can help you if you let me know your problem specifically. You can also resort to old practice but that will not be in the interest of your Co. You will suffer financial loss in the form of interest loss. You must avail the benefit what Govt. has given.

[Suryanarayana Sathineni]

Dear Friend,

In my view, if the major portion of the value of the goods covered in the invoice is of high value items, it would be better to take under capital goods definition instead of taking in two accounts which will have a future consequences.

In case the invoice have the break-up of small value items and high value, then you may take credit under both inputs and capital goods.

Best Regards

Suryanarayana

[Yatin Bhopi]

Sir

Thanks for immediate replay.

There is no any loss but accounting of bills need to be done more carefully (ledger accounting codes for CENVAT credit of Input and capital goods are separate). Secondly record keeping is also is a issue. Since CENVAT credit registers of input and capital goods are separate, record files are also separate here also will required to keep xerox copy in one of the file(either in capital or input) for ready reference for audit purpose.

I think since there is no clear guidelines on the bills where both value are included we have no choice but to take part credit in input and partly in capital goods.

[CSSANJAY MALHOTRA]

Dear Yatin,

To ensure compliance better to account CENVAT of Capital Goods < ₹ 10,000/- per piece in INPUT Register and others in CAPITAL Register.

Principles has to be followed to ensure Compliance. You can mention Entry No of both registers on Invoice and enclose photocopy for ease purpose in file where value is lower or as you desire.

Practically when you come across Invoice with expenses spread in different heads, would Accounts post all the transaction under one expense. Rest is your Management call.

[Ganeshan Kalyani]

I agree with the views submitted by the experts above. In addition to their views I would like to state as under:

Since capital goods of value upto ₹ 10,000/- is allowed to be treated as input and the entire cenvat credit on that is allowed to be taken in the same year, I would prefer to suggest that the entire invoice value should be booked in RG23C. And while utilising the credit entire credit should be debited to the account by mentioning the reference of said amendment.

And in Accounting package SAP, when Capital goods entry is passed usually, 50% of the credit is debited to 'Capital Cenvat Account' and balance 50% gets debited to 'Cenvat on Hold A/c'. And the credit of the amount lying in this account is taken credit in following year.

Now when the capital goods of value upto and above 10K is received under single invoice, then questions arises that how to account it in the books. I would suggest the querist to ask his IT help desk to create a separate tax code for the capital goods of value upto 10K, so that the entire credit on capital goods upto value of ₹ 10K is debited to 'Capital Cenvat Account' and for the capital goods of value above ₹ 10K is accounted as per existing practice as mentioned in the beginning of this para.

Hope the above suggestion is welcome. If not, request the learned experts to share their opinion on the same. Thanks.

[Yatin Bhopi]

Fully agreed with all your views and suggestions. Thanks a lot.

[DR.MARIAPPAN GOVINDARAJAN]

I fully agree with the views of CS Shri Sanjay Malhotra. In case if the service provider is having no input then 100% may be taken on the capital goods having less than ₹ 10,000/- or only 50% is to be taken. Please analyze this issue.

[phani kumar bsk]

Dear Experts,

I would like to add some more queries to the debate.

"the capital goods value having less than 10000 rupees it should be treated as input" if the said statement is true than the manufacturer who is manufacturing only excisable goods he will enjoy the entire credit amount in the same financial year there is no problem for him.

However, the assesse who is manufacturing exclusively exempted goods is not eligible for CENVAT.

Whereas, is the manufacturer who is manufacturing both excisable and non-excisable goods eligible for CENVAT ?

If yes, how he will quantify the capital goods in order to fallow the rule-6.

With what intention the department have fixed the limit of 10000/-.

Help me to come out from this confusions or doubts.

Thanks dear experts

AI Summary

Treatment of small-value capital goods as input credit requires apportionment and separate accounting for mixed invoices.
Where an invoice contains both capital goods treated as input (qualifying small-value items) and higher-value capital goods, CENVAT credit must be apportioned: credit for qualifying small-value items is taken to the input credit account, while credit for higher-value items is accounted under capital goods, necessitating separate ledger entries, registers, and supporting invoice references or tax codes to ensure compliance and auditability.