Krish Kalyan cess - cenvatable?

[venkat eswaran]

Dear All,

We are mfg units and taking ser tax credit. The new krish kalyan cess 0.5% of service tax in cenvatable? We can take ser tax credit or like SB cess not cenvatable.

Expecting ur reply

Thanks in advacne

Venkat

[DR.MARIAPPAN GOVINDARAJAN]

It is CENVATable.

[KASTURI SETHI]

Krishi Kalyan Cess will be applicable from 1.6.16.

[Ganeshan Kalyani]

In my view cenvat credit is not allowed to manufacturer. Only the service provider can take the credit to pay output KKC.

[Rajagopalan Ranganathan]

Sir,

As per para 3.1of D.O.F. No.334/8/2016-TRU dated 29.2.2016 " Krishi Kalyan Cess 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. It is not leviable on manufactured products (excisable goods). If you are a manufacturer you can take the credit of Krishi Kalyan Cess paid on input services received by you but you cannot utilise it since KKC is not leviable on excisable goods. Only output service provider can take the credit and utilize the same for payment of KKC on output service provided by him.

[Ganeshan Kalyani]

Sri Rajagopalan Sir thanks for the giving reference which has supported my views also.

Further I would request to you to please share your views on the provision mentioned in your reply which states 'credit can be taken by manufacturer but cannot utilise'. what is the benefit by taking the credit when it cannot be utilised. Thanks.

[MADAN RAHEJA]

Dear Sir (s)

Hon’ble Finance Minister in his budget speech stated as under:-

152. I propose to impose a Cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services, proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. The Cess will come into force with effect from 1st June 2016. Input Tax credit of this cess will be available for payment of this cess.

2. Clause 158 in Chapter VI of Finance Bill, 2016, when enacted, would become charging Section which prescribes chargeability of cess w.e.f. 1-6-2016 and applicability of all provisions of Finance Act. 1994 and Rules made thereunder so far as they relate to refunds, exemption, interest and penalty.

3. As for credit of this cess and its utilization is concerned, the intention of Government is reflected in FMs speech although suitable amendments can be made in Cenvat Credit Rules, 2004 only after Finance Bill is enacted. At present Cenvat Credit Rules are silent. Since as per Govt.’s intention, input tax credit of this cess is proposed to be available for payment of this cess, a manufacturer who does not have to pay this cess cannot utilise credit of this cess borne by him on input services. Therefore, practically there is no purpose of taking credit of this cess by a manufacturer as only a service provider can utilize it, unless of course a manufacturer is discharging service tax on some services under RCM. For exact details, let us wait for amendments in CCR.

[KASTURI SETHI]

Thanks to Sh.Madan Raheja, Sir for making the picture crystal clear.

[Rajagopalan Ranganathan]

Dear Shri. Ganesanji,

If a manufacturer of excisable goods receives input service in connection with manufacture of his final product, he has a legal right to avail the credit of KKC paid by the service provider. The Department or any other authority cannot preclude the manufacturer from taking the credit on the ground that no KKC is leviable on the manufactured product. Even now the department cannot prohibit the manufacturer from taking credit of KKC and accumulate the same in his credit.account. Even it will not lapse at the end of the financial year. There is no provision under the law stipulating that unutilised credit will lapse. There should be a specific prohibition under Cenvat Credit Rules, 2004 that a manufacturer cannot take credit of KKC> Until then a manufacturer of excisable goods can take credit KKC but he cannot utilise the same since no KKC is leviable on excisable goods. This is my view.

[Ganeshan Kalyani]

Sir why the provision is such that credit can be taken but cannot be utilized. This implies that credit can be accumulated in the books and whenever in future the law is amended to allow the manufacturer to utilize the credit immediately the total amount of accumulated credit can be utilized. Thanks. Otherwise to show in books of account the amount for which credit is not allowed I don't get any idea behind doing so. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Keeping in view the replies of all experts, it can be inferred that the Govt. may allow manufacturer to utilise the credit of KKC later on. Actually as per law, cess is also a kind of duty. To allow credit or not, it depends upon Govt.'s policy.

[Ganeshan Kalyani]

Sri Kasturi Sir thanks for making my doubts more clear. Thanks.

[Guest]

In my view, the reason for allowing for accumulating the credit and not utilising is that, a manufacturer can start providing taxable services in the future, and the accumulated KKC credit can be utilised for payment of KKC on those taxable services.

[Ganeshan Kalyani]

Can the accumulated KKC of the input availed for manufacturing purpose be utilised against the output liability on the service that a manufacturer would do in future as you mentioned in your post. Your view is welcomed in this regard. Thanks.

AI Summary

Krishi Kalyan Cess credit available but manufacturers may be unable to utilise it against excisable outputs. Krishi Kalyan Cess applies to taxable services and is not leviable on excisable goods. Manufacturers may lawfully take Cenvat credit of KKC paid on input services but cannot utilise that credit against excise outputs because KKC is not chargeable on manufactured goods; only output service providers can utilise KKC credit for payment of KKC on output services. Unutilised KKC credit does not lapse under existing rules and may be accumulated pending statutory amendment or future taxable service activity by the manufacturer.