03 August 2025
Regarding ways to reduce accumulation of CENVAT credit on common inputs, here are some key points and practical steps: Ways to Reduce CENVAT Credit Accumulation on Common Inputs: Annexure I Submission: As you mentioned, Annexure I (a declaration of proportionate use of inputs) is submitted to the excise department to specify how inputs/common inputs are utilized between dutiable and exempted goods/services. Proper submission ensures that input credit is utilized correctly and excess accumulation is avoided. Proper Apportionment: Inputs used partly for exempted goods and partly for dutiable goods should have input credit apportioned accordingly under Rule 6 of CENVAT Credit Rules, 2004. This helps in credit reversal on exempted portion, preventing credit piling. Timely Utilization: Use available credit within the prescribed time limits (credit cannot be carried forward indefinitely without utilization). Planning production and procurement to match consumption can reduce unnecessary accumulation. Avoid Excess Stocking: Avoid excess purchase of inputs to prevent unnecessary credit accumulation. Proper Documentation: Keep clear records and documents of input use and credit claimed for accurate accounting and audits. Opt for Regular Review: Regularly review your credit balances and consumption to identify and correct accumulation issues early. Service Providers: Service providers can also reduce accumulation by proper classification and use of input services. Summary: Approach Benefit Submit Annexure I Proportionate credit claim, avoid excess Credit Apportionment (Rule 6) Reverses credit on exempted use Timely Utilization Prevents credit expiry Avoid Excess Purchase Prevents accumulation Maintain Documentation Audit friendly, error-free credit claims Regular Review Early detection and correction
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