(a) CENVAT credit is not allowed on such quantity of inputs or
input services which are used in the manufacture of exempted
goods or provision of exempted services except in the manner
specified. [Refer the discussion in Chapter XI – Proportionate
credit mechanism].
(b) No CENVAT credit is allowed on capital goods which are used
exclusively in the manufacture of exempted goods or in
providing exempted services, other than the final products
which are exempt under SSI exemption scheme under central
excise.
(c) No CENVAT credit is allowed on inputs/capital goods/input
services to a service provider who has opted for threshold
exemption scheme (Rs.10 lakhs) in terms of Notification No.
6/05 (as amended by Notification No. 8/08 – ST dated
1.3.2008) .
(d) Similarly, no CENVAT credit is allowed on inputs/input services
to a manufacturer who has opted for SSI exemption in terms of
Notification No. 8/2003. However, credit on capital goods can
be availed in such a case.
(e) CENVAT credit on capital goods is not allowed in respect of
that part of value of capital goods which represents the amount
of duties/taxes on such capital goods which the manufacturer of
final products or service provider claims as depreciation under
Section 32 of Income Tax Act, 1961.
(f) In cases where deduction of value of goods sold/used is
claimed by the service provider under Notification No. 12/2003,
credit of excise duty paid on inputs is not allowed. However,
credit of service tax paid on inputs services and excise duty
paid on capital goods is allowed.
(g) In cases where, under Notification No. 1/06 – ST dated1.3.06
abatements have been claimed by specified service provider,
no input credit of duties on inputs / capital goods or the service
tax paid on input services can be availed. It would thus be
relevant for a service provider to find out whether opting for the
same would be feasible considering the credits which could
otherwise be available to him.
(h) In terms of Notification No. 13/08 – ST dated 1.3.08, an
unconditional abatement of 75% from the value of taxable
services is granted to service provider engaged in
transportation of goods by road (GTA) services.
In line of aforesaid, GTA services have been excluded, from the
definition of output service under Rule 2(p) of CENVAT Credit
Rules, 2004. Hence, GTA service provider cannot avail any
benefit of CENVAT credit under CENVAT Credit Rules, 2004.
(i) In regard to service provider registered under works contract
service (introduced w.e.f. 1.6.2007), an optional composition
scheme has been notified vide Notification No. 32/07 – ST
dated 22.5.07 under Works Contract (Composition Scheme for
Payment of Service Tax) Rules, 2007.
A service provider who has opted for paying service tax under
composition scheme at 2% (increased to 4% w.e.f. 1.3.08) can
not avail CENVAT credit in respect of the duties paid on inputs.
However, he can avail CENVAT credit of duties paid on capital
goods / service tax paid on input services.
Another option which a works contractor can examine, is
paying the service tax on the gross amount charged without
claiming deduction for value of goods and materials sold, which
would enable him to avail CENVAT credit of the excise duties
incurred on materials or inputs used for such service. This can
result in reduction of cost of service especially where most of
the materials used for service, have suffered duty of excise at
the time of the procurement by such service provider.
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