Cenvat credit

[Anish Goyal]

Sir,

One of my client has imported gym equipments for setting up a gym and running a gym. Whether he will be eligilbe for CENVAT Credit of CVD paid as per Section 3(1) of the Custom Tariff Act on equipments imported and used for provided a taxable output service.

[Himansu Sekhar]

Please verify rule 2(a) of CCR 2004. If it is classified under the specified Tariff , he can take the credit.

[KASTURI SETHI]

I concur with the views of Sh.Himansu Sha Ji.

[Himansu Sekhar]

Thank you sir

[DR.MARIAPPAN GOVINDARAJAN]

Whether your turnover exceeds the threshold limit of ₹ 10 lakhs?

[Anish Goyal]

Yes, turnover above ₹ 10 Lakhs. Gym Equipments falls under Ch. 95 of the CETA.

Yesterday, I studied a lot about this issue. I came to the following conclusion:

In the definition, the capital goods are specifically excluded. If certain goods which does not fall under the definition of capital goods but used in provision of services it can be classified as inputs and the credit can be availed.

The definition reads “Capital goods”, so only those goods defined as “capital goods” under CENVAT credit rules will be excluded from the definition of inputs. The definition of capital goods is restrictive whereas the definition of inputs is inclusive. Therefore, for other capital goods cenvat credit can be taken.

I request all the experts to kindly go through the definition of 'inputs' by keeping in mind the above logic and post your opinion.

[Nash Industries I Pvt Ltd]

As per definition of inputs all goods used for providing any output service is an input but excludes capital goods

Further, without these equipments the gym cannot run and therefore am of the view it can also be called as an input and credit can be availed.In that case, it should be ensured that it is not capitalised in the books of accounts.

Under the GST law, capital goods are defined as those goods that are capitalised in the books of accounts.

Please take a call holistically.

Regards

S.Ramaswamy

[KASTURI SETHI]

Nicely explained by Sh.S.Ramaswamy, Sir.

[Himansu Sekhar]

Whether the cost of the Gym materials is included in the taxable value

[YAGAY and SUN]

In our view CENVAT credit is available on the capital goods which are being used by the service provider for providing of the taxable services. However BCD will be a cost to the gym owner/service provider.

AI Summary

Cenvat credit availability for imported gym equipment depends on input versus capital goods classification and capitalisation.
CENVAT credit on imported gym equipment hinges on whether the equipment is an input or a capital good: goods used for providing output services are inputs unless they qualify as capital goods. If the equipment does not meet the restrictive definition of capital goods under the CENVAT Credit Rules and is not capitalised in the books, credit may be availed. Classification under applicable tariff rules and compliance with turnover-related conditions must also be satisfied; under GST, capital goods are identified by capitalisation in accounts.