Vat
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
04 October 2013
what is CENVAT?? AND ITS INPUT CREDIT
04 October 2013
Cenvat is the input credit that you get when you purchase goods/Raw material from registered dealer/Manufacturer.
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04 October 2013
Every service provider is also a service receiver.
For Example all the service providers have at
least a Telephone in their office. They are
paying service tax on the telephone charges .
The service tax on telephone charges becomes
a part of the cost for the service provider .
When he collects service tax from the customer
it becomes tax on tax which increases the
actual rate of tax payment.
This phenomena of tax on tax is called the
cascading effect. The government does not
want this to happen.
Therefore the system of cenvat credit was
introduced by the Government. This allows the
service provider to take the credit of tax paid
for the service received.
Therefore the tax paid does not become part of
the cost of the service provided and cascading
effect is avoided.
This system of taking credit on the tax paid
and using the credit for the tax payable is
called cenvat credit
For Example all the service providers have at
least a Telephone in their office. They are
paying service tax on the telephone charges .
The service tax on telephone charges becomes
a part of the cost for the service provider .
When he collects service tax from the customer
it becomes tax on tax which increases the
actual rate of tax payment.
This phenomena of tax on tax is called the
cascading effect. The government does not
want this to happen.
Therefore the system of cenvat credit was
introduced by the Government. This allows the
service provider to take the credit of tax paid
for the service received.
Therefore the tax paid does not become part of
the cost of the service provided and cascading
effect is avoided.
This system of taking credit on the tax paid
and using the credit for the tax payable is
called cenvat credit
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