4. Changes in Cenvat Credit Rules , 2004
(Effective from 11th July 2014 except otherwise specifically specified)
i) The term “Place of Removal” is defined
Cenvat credit of input services upto the ‘place of removal’ is allowed. The term ‘place of removal’ was earlier not defined in Cenvat Credit Rules 2004. However, the said term was defined in section 4(3)(c) of Central Excise Act 1944. The Hon’ble Delhi CESTAT in the case of M/s Ultratech Cement Ltd. 2014 TIOL 478 held that the definition of the term ‘place of removal’ as appearing under Central Excise Act cannot be applied under Cenvat Credit Rules. Hence, the said term is now defined under rule 2(qa) of Cenvat Credit Rules 2004 as well which is similar to the definition appearing under Central Excise Act 1944.
ii) Cenvat Credit on services wherein entire service tax is paid by service recipient can be availed on payment of service tax.
a) Earlier, the cenvat credit of service tax been paid under reverse charge was allowed only after payment of service tax to the government as well as after payment of service value to the service provider. However w.e.f. 11th July, 2014, the credit of service tax paid on services, where 100% service tax is paid by service recipient shall be eligible on payment of service tax to the government irrespective of the fact whether payment to service provider for the services have been made or not.
Therefore, in case of import of services, the service recipient can take cenvat credit as soon as they pay the service tax even if the payment to the vendor is not made. This will also apply in cases like GTA, sponsorship, legal services etc.
b) It must be noted that there is no change with respect to cenvat credit of input services wherein entire service tax is paid by service provider i.e. the credit can be availed on receipt of invoice & it must be reversed if payment is not made to the vendor within 3 months of the date of invoice.
c) Further, in case of partial reverse charge (rent-a-cab, works contract, manpower supply, security) cenvat credit with respect to service tax paid by the service provider can be availed when the payment is made to the service provider for such service (and not on receipt of invoice) & in respect to service tax paid as service receiver, it can be availed only after the payment towards value of services has been paid to the provider of service & service tax has been deposited to the Government.
iii) Rule 6(8) of Cenvat Credit rules, 2004
As per the provisions of rule 6(8) of Cenvat Credit Rules 2004, an assessee was required to reverse the cenvat credit pertaining to export of services if the foreign currency is not received within a period of 6 months from the date of provision of service or such extended period as maybe allowed from time-to-time by the RBI As per the amendment made, if the service provider receives the payment after 6 months or after the extended period as maybe allowed by RBI but within one year from such period, then the cenvat credit so reversed can be availed back to the extent of amount received. It must be noted that in case the payment is received after the end of such period of one year, then the assessee is not eligible to avail the cenvat credit.
This amendment shall even apply to cases where exports have already been made & the payment has not been received within the specified period.
iv) Rule 12A(4) of Cenvat Credit rules, 2004
Henceforth, an LTU is not allowed to transfer cenvat credit from one unit to another unit. Any cenvat credit which has been taken upto 10th July 2014 can only be transferred.
v) Cenvat credit can be availed within 6 months only (effective from 1st September 2014).
Earlier there was no time restriction on availment of cenvat credit. The provisions of cenvat credit rules are amended whereby a manufacturer or a service provider shall not take cenvat credit of inputs, input services after a period of six months from the date of issue of invoice, bill or challan as the case may be. It must be noted that cenvat credit with respect to invoices/ challans/ bills which are dated prior to 1st September 2014 will also be subject to such time restriction.
For example, cenvat credit is not yet taken for a bill dated 1st July 2014. Such credit can be availed only till 31st December 2014. It is thus advisable to immediately take cenvat credit of all pending invoices/ bills.
There are many cases when assessees are receiving input services but have not taken any registration as they are not engaged in providing any taxable service during that period. For example, in telecommunication industry, the assessee incurs huge cost towards setting up of tower & other infrastructure. At this time, the assessee is receiving many input services but is not providing any taxable service. In such cases, the assessee must take registration & file periodical returns wherein credit must be duly availed.
vi) ISD distribution
The provisions relating to distribution of credit from ISD were amended vide notification no. 5/2014 dated 24.02.14. There was a confusion that whether credit pertaining to more than one unit is to be distributed amongst only those units to which the service pertains or to all the units. This has now been clarified by the Board vide circular no. 334/15/2014-TRU dated 11.07.14 wherein it is explained that credit is to be distributed to all the units if any service pertains to more than one unit.
CA. Vineeta Chhatwani Chartered Accountant, M.COM
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