Ritu (24 Points)
19 October 2007
The definition of input for cenvat credit on service tax covers inward transportation of goods .the query is that if some goods which are non cenvatable (these goods are not used in mfg or production of final productsc like steel for modernisation) are brought and service tax on freight is paid on the carriage of goods in the factory i.e. inward transportation whether cenvat credit of such service tax can be taken.
Dayal
(Gen. Manager - Indirect Taxation)
(3451 Points)
Replied 20 October 2007
Ajay Gumbar
(Chartered Accountant)
(53 Points)
Replied 02 November 2007
I want to know the full detail related with gta, i.e service tax payable on freight inward, service tax payable on freight outward, service tax credit on freight inward and no service tax credit allow on freight outward.
Also the full detail of freight inward and freight outward and definition for freight inward, freight outward and its meaning.
Regards,
Yashwant Raghav
(M) - 9811770359
S. Banerjee
(Practising Cost Accountant. Core area- C)
(622 Points)
Replied 06 April 2008
Integration of Excise duty and Service Tax Credit and its eligibility
The Union Finance Minister propose to extend Credit of service tax and excise duty across goods and services with effect from 10.09.2004 under Cenvat Credit Rules, 2004. “Cenvat” is used to refer to provisions in respect of credit of excise duty paid on inputs and capital goods and service tax paid on input services, which is available for payment of excise duty on final product and service tax on output services.
The Cenvat scheme is principally based on system of granting credit of duty paid on inputs and input services. A manufacturer or service provider has to pay excise duty and service tax as per normal procedure on the basis of “Assessable value” (which is mainly based on Selling Price). However, he gets credit of duty paid on inputs and service tax paid on input services. Rule 3(1) of Cenvat credit rules states that a manufacturer or producer of final products and a provider of output service shall be allowed to take Cenvat credit.
Under 2(1) Cenvat Credit Rules “Input Service” means any service-
i) used by a provider of taxable service for providing an output service; or
ii) used by the manufacturer, whether directly or indirectly, in or in relation to manufacture of final products and clearance of final products from the place of removal.
This is includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting auditing, financing, recruitment and quality control, coaching and training computer networking credit rating share registry and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal. In fact, all input services relating to all activities relating to business are eligible for Cenvat credit.
But duty paid on inputs and service tax paid on input services used for manufacture of exempted products/services cannot be used for payment of duty or tax on the other final products/services which are not exempt from duty/tax.
The words “place of removal” defined in section 4(3)© of Central Excise Act but not been defined in Cenvat Credit Rules. It thus clear that service tax paid on all expenses of transport, insurance up to and in the depot or place of consignment agent will be eligible for Cenvat credit, accordingly, Outward Freight is also eligible.
The words used are “outward transportation up to the place of removal”. It does not mean outwards freight after palace of removal is excluded.
The words “such as” are used only to illustrate the scope. It is not restrictive.
So, there is no doubt that freight paid after place of removal is a “input service”, as defined rule 2(1)(ii) i.e. any service used by the manufacturer in or in relation to clearances of final products from the place of removal.
Subsequently, C.B.E. & C had clarified that in case of depot sales, credit of service tax paid on transportation would be available up to depot whether the goods are chargeable to specific rate of ad valorem rate of duty on valuation under sec 4 or sec 4A i.e. transaction value or MRP based value.
As long as the freight is an input service and as long as the same is used directly or indirectly in manufacture and clearance of final products, Cenvat credit on the same is legally available. This has been judicially decided. The decision held in this case that outward transportation of finished goods manufactured by appellant falls under “input service” and Cenvat credit of service tax paid on transportation of finished goods from factory to customer’s premises is admissible. As long as Rule 2(1) contains the phrase “used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal”, outward freight is also an input service and credit is very much admissible thereon upto 29th Feb 2008. .
If any other clarification is required contact with me at banerjee.sambhu @ rediffmail.com
Thanks,
S. Banerjee
CAclubindia
