13 July 2014
Hello Experts!! I am going to start a new business of Manufacturing PP/HDPE Woven bags by purchasing PP/HDPE woven fabrics from suppliers on which the excise duty will be paid. My query is that do I also need to pay excise on my final product that is "bags" which will be converted from fabrics at my premises. The main problem is that if I charge duty on my final product then the rates of my product will rise and I will not be able to strive in the market. So, Please suggest the best way to overcome this problem.
15 July 2014
But Excise duty is also applicable on the fabrics made out of Polypropylene granules. We have to pay Excise duty on purchase of fabrics also.
My query is that is the Cenvat available on the purchase of fabrics and selling of bags??
15 July 2014
If you are manufacturing the granules from scrap then duty will be applicable on granules. If granules are used in the manufacturing of exisable goods then no need to pay excise duty on manufacturing of granules. If granules are used in the exempted goods then duty will be payable.
02 August 2024
When dealing with excise duty and the CENVAT credit mechanism, it’s important to understand how they apply to your business operations, especially in the manufacturing of PP/HDPE woven bags. Here’s a detailed overview of how excise duty and CENVAT credit can be managed in your situation:
### **1. Excise Duty on PP/HDPE Woven Bags**
Excise duty is a tax on the production or manufacturing of goods within India. For your business, which involves manufacturing PP/HDPE woven bags from fabrics, the key considerations are:
- **Excise Duty on Woven Bags**: As of recent regulations, excise duty is generally not applicable on the manufacture of PP/HDPE woven bags. This is because the excise duty on these goods has been removed under the new indirect tax regime, particularly after the introduction of the Goods and Services Tax (GST) regime in July 2017.
### **2. Excise Duty on PP/HDPE Fabrics**
Excise duty was applicable on the manufacture of PP/HDPE fabrics prior to the GST implementation. However, under the GST regime, the taxation on these fabrics falls under GST, not excise duty.
### **3. CENVAT Credit**
**CENVAT Credit Mechanism**:
- **On Inputs (PP/HDPE Fabrics)**: CENVAT credit is available on the excise duty paid on inputs (like PP/HDPE fabrics) used in the manufacture of final products. This means that if you have paid excise duty on the purchase of these fabrics, you are entitled to claim CENVAT credit on the duty paid.
- **On Final Product (Bags)**: Since excise duty on the manufacture of PP/HDPE woven bags is not applicable, the issue of charging excise duty on your final product does not arise. However, under the GST regime, you should consider the GST implications.
### **4. Transition to GST**
Under the GST regime, the focus has shifted from excise duty to GST. Here’s what you need to know:
- **GST on Fabrics**: PP/HDPE fabrics are now subject to GST. Ensure that you receive the appropriate GST invoices from your suppliers and claim Input Tax Credit (ITC) on the GST paid on these fabrics.
- **GST on Bags**: The manufacture and sale of PP/HDPE woven bags are also subject to GST. You need to charge GST on the sale of these bags and comply with the GST regulations.
- **Input Tax Credit (ITC)**: You can claim ITC on GST paid on inputs (fabrics) used in the manufacture of final products (bags). This helps offset the GST liability on your sales.
### **5. Managing Market Impact**
To mitigate the impact of GST on your product prices:
- **Optimize ITC**: Ensure that you are fully utilizing the Input Tax Credit available to you to minimize the impact on your final product pricing. - **Cost Management**: Look for cost-effective ways to manage your input costs and optimize operational efficiencies.
### **6. Practical Steps**
1. **Verify GST Registration**: Ensure that your business is registered under GST. 2. **Maintain Proper Documentation**: Keep detailed records of all GST invoices and CENVAT credit claims. 3. **Consult a Tax Advisor**: For personalized advice and to ensure compliance with current regulations, consult a tax professional or advisor who is familiar with GST and excise duties.
### **Summary**
- **Excise Duty**: Not applicable on PP/HDPE woven bags under the current GST regime. - **CENVAT Credit**: Available on excise duty paid on inputs (fabrics) before the GST regime; now, ITC under GST applies. - **GST**: Applicable on both the purchase of fabrics and the sale of woven bags. Claim ITC on the GST paid on inputs.
By adhering to these guidelines and leveraging the input tax credit mechanism, you can manage the tax impact on your product pricing effectively.
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