CENVAT CREDIT RULES, 2004
Till now the manufacturers were entitled to the credit of central excise duties
paid on the inputs and capital goods. The credit of the service tax paid on input
services consumed in the manufacture of finished goods was not allowed. The new
Cenvat Credit Rules, 2004 effective from 10.09.2004 extend the benefit of the
credit of the service tax paid on input services to the manufacturers of finished
IMPLICATION FOR THE MANUFACTURERS
Input services have been defined as the services used by the manufacturer, whether
directly or indirectly, in or in relation to the manufacture of the final products
and clearance of final products from the place of removal. Input services
include services used in relation to setting up, modernization, renovation or
repairs of a factory, an office relating to such factory, 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 outward
transportation up to the place of removal.
The credit in respect of input services is available in respect of services received
In respect of input services the credit can be taken on or after the date of payment
of value of inputs service and the service tax paid or payable as reflected in
The credit in respect of the following input services can be availed in full except
when they are used exclusively for providing exempted services. This position
is akin to the credit of duty in respect of capital goods.
- Consulting Engineering Services.
- Services of an Architect in his professional capacity.
- Services of an Interior Decorator.
- Management Consultancy Services.
- Services of a Real Estate Agent.
- Services by a Security Agency.
- Scientific or Technical Consultancy Services.
- Services by a Banking Company or a Financial Institution including NBFC.
- Services by a body corporate other than (h) above, in relation to banking
and other financial services.
- Services of an actuary or intermediary or insurance intermediary or insurance
agent, in relation to Insurance Auxiliary Services concerning life insurance
- Service by Erection, Commissioning and Installation Agency.
- Services in relation to Maintenance and Repair.
- Services by a Technical Testing and Analysis Agency.
- Services by a Technical Inspection and Certification Agency.
- Services by a Foreign Exchange Broker other than those brokers in relation
to banking and other financial services referred in (h) and (i) above.
- Services by a Commercial Concern in relation to Construction Service.
- Services by the holder of Intellectual Property Right in relation to Intellectual
The credit of Cess paid on service tax can be used for payment
of Cess on the central excise duty payable on finished goods.
The credit is also available for input services used in
the manufacture of intermediate products, by a job-worker availing exemption
under Notification 214/86-CE dated 25.03.1986, and received by the manufacturer
for use in relation to the manufacture of final product, on or after 10.09.2004.
The prescribed documents for availing credit of service tax.
- An invoice, bill or challan, issued by a provider of input service on or
- An invoice, bill or challan, issued by an input service distributor.
An invoice, bill or challan, issued by the provider of input
service should inter alia contain the following details.
An invoice, bill or challan, issued by the input service distributor should inter
alia contain the following details.
- The name, address and registration number of the provider of the input service.
- The name and address of the person receiving taxable service.
- Description, classification and value of taxable service provided or to
- The service tax payable thereon.
- The name, address and registration number of the person providing the input
services including the serial number and date of the invoice or the bill of
the input service provider on the basis of which the tax was paid by the input
- The name, address and registration number of the input service distributor.
- The name and address of the recipient of the credit distributed.
- The amount of the credit distributed.