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The most awaited notification on the fate of opening cenvat credit of Education Cess (EC) and SHE Cess (SHEC) lying as on 01/03/2015 has been notified on 30/04/2015.  But this notification speaks about only excise duty payable by manufacturers but not on service tax payable by service providers.

Background of this notification:

W.e.f 01/03/2015, both EC and SHEC were subsumed into basic duty and thereby the rate of duty has been settled at 12.5%.  That means, there is no need of charging both the cessess alongwith excise duty while clearing the excisable goods from the said date onwards.  Whereas there was no clarity about the fate of opening balance lying in the credit of EC and SHEC since these cannot be used as the same were no more in existence from 01/03/2015.  Now, to give clairty, CBEC brought out a notification allowing them to utilize against the excise duty liability arising against the clearances after the said date.  For more clarity, we should know the position prior to 01/03/2015 i.e., these cesses shall not be utilized against the duty liability but for payment of EC & SHEC only, so there is every chance to have opening balance of these cessess lying un-utilized as on 01/03/2015.

Effect of this notification:

Hence, it is open now to the manufacturers to set-off the opening balance of EC & SHEC against duty liability on clearances of excisable goods.

Note: Likewise, there must be opening balance lying in the credit of cenvat of these cessess on input services and capital goods in the case of service providers but this notification is silent on this matter. ( You may please note that there are common rules both for manufacturer and service provider in the case of Cenvat credit Rules, 2004 ).  Now we need to wait for another notification on service tax for the benefit of service providers!!


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(Practising Chartered Accountant)
Category Service Tax   Report

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