Cenvat Credit of Krishi Kalyan Cess

[Greeshma Vp]

Dear experts,

Please give your opinion on whether a manufacturer can avail Cenvat credit of Krishi Kalyan Cess (KKC). I am aware that as per the provisions, Cenvat credit of KKC can be used only for payment of KKC on output service. It is also clear that cenvat credit of KKC cannnot be used for payment of KKC on services under Reverse Charge Mechanism. So a manufacturer has no chances of utilising KKC.

My query is whether a manufacturer can avail Cenvat credit of KKC in books and hope to claim a refund of the same at a later point of time. Or should the manufacturer write-off KKC as expenses?

Thanks,

Greeshma

[SHIVKUMAR SHARMA]

Dear Greeshma Vp

Manufacturer can not avail cenvat Credit of KKC ,The Service Provider can take cenvat of KKC.

SHIVKUMAR SHARMA

[Ganeshan Kalyani]

You have correctly understood the provision. In the same topic there was a lengthy discussion In this Forum. As of now manufacturer is not allowed to take credit of KKC, but to be on a safer side this credit need to be parked in the accounts so that if in future the credit is made eligible to manufacturer credit can be availed.

However parking the credi in your account would inflate your current asset in the balance sheet, which may show wrong picture. Further if you expense it out at the time of booking of invoice you will get the benefit of deduction in debit side of the profit and loss account.

Now the choice is yours.

[Greeshma Vp]

Thank you for the responses. I think we may decide to book KKC as expenses rather than avail credit.

[Ganeshan Kalyani]

Sir, you may decide so. If any notification comes in line with the query then you will have to re-account as Cenvat credit in books. Thanks.

AI Summary

Cenvat credit of Krishi Kalyan Cess limited to service providers; manufacturers should expense or retain pending eligibility.
Credit of Krishi Kalyan Cess can be used only for payment of KKC on output services and is not available for services under the Reverse Charge Mechanism; manufacturers therefore cannot presently utilise KKC credit. Manufacturers may either park the KKC as an asset in accounts pending possible future eligibility-accepting balance-sheet inflation-or expense it immediately, with any later change in law requiring reclassification to Cenvat credit.