Eligibility of cenvat credit on GTA

[Guest]

A limited company is producing the goods which are attracting state excise duty on its final product. It purchases the raw material, packing material. The transporataion of these items result into payment of freight and as per service tax act the company is depositing the service tax on freight after availing abatement of 75% on freight amount. The company also uses the transport facility for sending its finished products to its customers. In the process it also deposits the service tax on this outward freight also after availing 75% abatement. Plz advise whether the company is eligible for CENVAT credit on the service tax deposited on inward and outward freight. If yes then specify the relevant rule/section. If not then why ? regards

[Surender Gupta]

For the purpose of payment of Central Excise Duty, the benefit of Cenvat Credit against service tax paid on clearance of goods and inward freight both are available. You may refer to rule 2(l) of the Cenvat Credit Rules, 2004.

[Guest]

Firstly, if you are depositing only tax on 25% of transport bill, ensure that the transporter stamps or prints or writes on bill that he has NOT AVAILED of any CENVAT Credit. On the inward freight, you are eligible for the CENVARD credit. If you have more than one factory, you register your head office as an input distributor and distribute the input credit to each factory if there is a centralised payment from head office for the freight. On the outward better check since as per my reading you are not.

AI Summary

Cenvat Credit eligibility on transport service tax: inward freight credit recognisable; outward freight credit appears restricted. Practitioners differ on Cenvat credit for service tax on freight: one asserts credit is available for service tax on inward freight and on service tax charged on clearance of goods under rule 2(l) of the Cenvat Credit Rules, 2004; another emphasises that transporters must declare non availment of Cenvat where limited tax is charged, and that input credit may be distributed from a registered head office to factories, while outward freight credit appears questionable.