Dgcset
This query is : Resolved
24 March 2016
I m manufacture and service provider. I have excisable purchase of DG set. DG set will give on hire rent. I will take rent agreement contract from client
I will take cenvat credit against output service. so please solve my query
24 March 2016
If I understand the query right - you are buying a DG Set which will be utilized for renting out to others. On the Supply of Tangible Goods you will be charging Service Tax. As a manufacturer you are also registered to Central Excise. You would like to know whether you can take the CENVAT Credit of dutiable input goods against output service tax liability.
IF THAT IS THE ESSENCE OF THE QUERY THEN THE ANSWER IS "NO".
As per Cenvat Credit Rules, 2004, though there is no necessity for a one to one relationship, CENVAT Credit on input goods can be utilized only to pay off output service tax liability. Dutiable goods used as input can be used to discharge the liability to pay off Excise Duty & Cess. Input Services are those services used, directly or indirectly, in the provision of output service or manufacture of dutiable goods. The Service Tax collected on DG Set Hire is not any service utilized directly or indirectly to manufacture dutiable goods. Hence it is not an eligible Input Service for CENVAT Credit.
However, if you capitalize the cost of the DG Set and show it as Fixed Assets, you can avail of CENVAT Credit of the Excise Duty paid on the DG Set as Capital goods input (you should have taken an excisable input invoice issued to manufactures and First Stage Excise dealers and not an ordinary invoice) by availing 50% Input in the year of purchase and the balance 50% in the subsequent Financial Year. This input credit can be utilized to pay off the output service tax on Supply of Tangible Goods Services.
IF THAT IS THE ESSENCE OF THE QUERY THEN THE ANSWER IS "NO".
As per Cenvat Credit Rules, 2004, though there is no necessity for a one to one relationship, CENVAT Credit on input goods can be utilized only to pay off output service tax liability. Dutiable goods used as input can be used to discharge the liability to pay off Excise Duty & Cess. Input Services are those services used, directly or indirectly, in the provision of output service or manufacture of dutiable goods. The Service Tax collected on DG Set Hire is not any service utilized directly or indirectly to manufacture dutiable goods. Hence it is not an eligible Input Service for CENVAT Credit.
However, if you capitalize the cost of the DG Set and show it as Fixed Assets, you can avail of CENVAT Credit of the Excise Duty paid on the DG Set as Capital goods input (you should have taken an excisable input invoice issued to manufactures and First Stage Excise dealers and not an ordinary invoice) by availing 50% Input in the year of purchase and the balance 50% in the subsequent Financial Year. This input credit can be utilized to pay off the output service tax on Supply of Tangible Goods Services.
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