DRAFT CENVAT CREDIT AMENDMENT RULES
F. No. 354/246/2012-TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Tax Research Unit
153, North Block, 17th December, 2013
Subject: – Draft CENVAT Credit Amendment Rules, on simplification of provisions relating to distribution of input service credit by Input Service Distributor – reg
Subsequent to the amendment done to rule 7 of CENVAT Credit Rules, 2004 with effect from 01.04.2012 and 01.07.2012, it has been represented by the trade that procedural difficulties are being faced in distribution of input service credit by input service distributor (ISD) under rule 7 of the CENVAT Credit Rules, 2004. The same issue was raised in the forum for exchange of views between Industry Groups and Government chaired by the Adviser to Finance Minister.
2. The issue has been examined and is proposed to amend the rule in the following manner to address the concerns of the trade. [The proposed changes to the existing rule 7 of the CENVAT Credit Rules, 2004 are shown in Italic, bold with underlining or striking of the portion which is to be deleted].
“7. Manner of distribution of credit by input service distributor. — The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely :—
(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon;
(b) credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed;
(c) credit of service tax attributable to service used wholly in a unit shall be distributed only to that unit; and
(d) credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover during the relevant period of the concerned unit to the total turnover of all its units sum total of the turnover of all the units to which the service relates during the same period.
Explanation 1. – For the purposes of this rule, “unit” includes the premises of a provider of output service and the premises of a manufacturer including the factory, whether registered or otherwise.
Explanation 2. – For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5.”
[Existing Explanation 3, is proposed to be replaced by the following explanation.]
Explanation 3. – (a) The relevant period shall be the month previous to the month during which the CENVAT credit is distributed.
(b) In case if any of its unit pays tax or duty on quarterly basis as provided in rule 6 of Service Tax Rules, 1994 or rule 8 of Central Excise Rules, 2002 then the relevant period shall be the quarter previous to the quarter during which the CENVAT credit is distributed.
(c) In case of an assessee who does not have any total turnover in the said period, the input service distributor shall distribute any credit only after the end of such relevant period wherein the total turnover of its units is available.
“Explanation 3.– The ‘relevant period’ shall be:
(i) If the assessee has turnover in the ‘financial year’ preceding to the year during which credit is to be distributed for a month or quarter, as the case may be, the said financial year ; or
(ii) If the assessee does not have turnover for some or all the units in the preceding financial year then, the latest quarter, for which details of turnover of all the units are available, previous to the month or quarter for which credit is to be distributed.”
3. Chambers, trade, industry and field formations are requested to go through the draft rules and offer their comments, views and suggestions. It is requested that comments, views and suggestions on the same may be forwarded to the undersigned on or before 27th December, 2013. The same may also be emailed to [email protected].
4. The draft ‘CENVAT Credit Amendment Rules’ have been put up only to elicit public response. No final decision has been taken as yet by the Government / Board. Any decision in the matter will be finalized only after due examination of the response received.
(S.Jayaprahasam)
Technical Officer (TRU)
Dear Sir,
With reference to the above, I would like to propose amendments to the proposed/draft Rule 7 of the Cenvat Credit Rules, 2004 as below:
In Clause (c), the word ‘wholly’ shall be substituted by the word ‘substantially’which would result into cost effectiveness for the assessee as well as the department.
(c) credit of service tax attributable to service used substantially in a unit shall be distributed only to that unit; and
Kindly consider the same.
Thanks & Regards,
Manoj Agarwal,
Service Tax Consultant,
Ganpati Campus, Opp. Hanuman Mandir,
Lal Building Road,
Rourkela – 769012