Cenvat credit and Depreciation on Capital Goods

[Pradeep Kaushik]

Respected Sirs,

we make import of capital goods( Machinery) for our manufecturing unit. Can we take the payment of CVD, additional duty as cenvat credit.

Is there any relation between Cenvat credit and Depreciation on the capital Goods. Because after a certain period the value of Capital goods will be written off due to regular depreciation charged. So according to Depreciation we have to reverse the credit of Cenvat. Please clarify.

 

[Snehal Kulkarni]

You can avail the Cenvat Credit on Imported CG of CVD, Cess on CVD, SHE Cess on CVD and Additional Custom Duty levied under section sub-section (5) of section 3 of the Customs Tariff Act 4%

50% Credit of CVD is eligible for this year and you can avail 100% credit of AED ( 4% )

 

For Depreciation please refer Rule 4 (4) of CCR 2004

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(4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer or provider of output service claims as depreciation under section 32 of the Income-tax Act, 1961( 43 of 1961).

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AI Summary

Cenvat credit on imported capital goods duties allowed but must be reduced to the extent depreciation is claimed. Cenvat credit is available on duties and cesses on imported capital goods, including countervailing duty, cess on CVD, SHE cess on CVD and additional customs duty, though specific components may be available to differing extents; however, credit for capital goods must be disallowed to the extent the value of those goods represents duty claimed as depreciation under the Income-tax law, creating a required reversal to align Cenvat credit with depreciation claims.