Cenvat credit is a beneficial scheme which has seen a number of changes mostly restricting credits to the manufacturers and service providers. There was a silver lining in this grim situation, whereby the missed out credits on eligible inputs and input services could be availed without any time limits. There were several decisions to this effect as well.
As per the FA(No.2) changes, wef 1.9.14 the availment of Cenvat Credit would have to be done within 6 months of the invoice date as per Notification no. 21/2014-CE-NT.
We had in earlier newsletter reported that credits on inputs and input services on invoices related to more than 6 months prior to 1st September 2014 to be availed immediately, without waiting for filing returns in Oct 14 and then intimated to department.
Understanding the Change & Impact
The restriction on credits of inputs and input services if not availed within 6 months wef 1.9.14 is a setback to movement towards seamless credits. The major impact of the restriction could be as under:
- I. Manufacturer/ service providers could automatically lose out on eligible credit if not availed up to February 2014 as on 1st day of September 2014.
- II. In future they need to ensure a completeness check is designed and confirm that credits are taken at periodic intervals- maybe a quarterly exercise.
- III. All doubtful credits can be availed now – Ex.- credit on outward GTA, illegal reversals made by audit parties but not utilised with disclosure.
- IV. In future if there are any demands for longer period- possibility of no credit being allowed need to be factored in.
Maximum Period Upto which past credit can be availed?
The list of credits could be intimated to the revenue with an appropriate covering letter by way of personal delivery or by speed post before 1st September 2014. This is an ideal situation however as many assessees may have come to know of the impact of the law only in the last few days may not
be practically possible.
Considering the purpose of the cenvat being beneficent scheme to avoid cascading a sudden change could possibly allow a transitional delay which maybe considered by the revenue or by courts. Considering the intent as also the fact that the credit is only availed in the returns the following possibilities exist:
1. The manufacturer only paying excise duty may indicate the credits availed in the month of august as per returns where list of credits not separately sent earlier to 1st September 2014. This may also be available for delayed returns. This gives additional time to capture and validate eligible credits till 10th of next month for manufacturers who are filing excise returns.
2. The service provider may indicate the credits availed in August in that column while filing their return to be filed by 25th October 2014 or in the delayed return. It could also possibly be included in the revised returns.
3. Where a manufacturer is also a service provider then 25th October return could include the inputs & input services used in services and the excise return for manufacture as per the current practice of the entity.
Immediately however a cenvat credit locating, capturing and availment before end of august 2014 /by 9th of September for manufacturers or by October 24th is the need of the hour.
- CA Roopa Nayakwww.hiregangeacademy.com