Carry forward of cenvat credit

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Bhubaneswar (Querist)
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24 July 2014 Dear Sir
We had a partnership firm and now we converted it to a Private Limited Co. Now we want to carry forward the CENVAT credit balance to PVt. Ltd.
Pls let me know the details procedure to carry forward to Pvt. Ltd. and
How to show the same in service tax return in both partnership firm and Pvt. Ltd..

Bhubaneswar

Bhubaneswar (Querist)
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25 July 2014 Can anybody help me in this matter...

We had a partnership firm and now we converted it to a Private Limited Co. Now we want to carry forward the CENVAT credit balance to PVt. Ltd.
Pls let me know the details procedure to carry forward to Pvt. Ltd. and
How to show the same in service tax return in both partnership firm and Pvt. Ltd..

Bhubaneswar

Bhubaneswar (Querist)
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Bhubaneswar

Bhubaneswar (Querist)
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Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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18 July 2024 Carrying forward CENVAT credit from a partnership firm to a Private Limited Company (Pvt. Ltd.) involves specific procedures and compliance requirements under the Service Tax rules in India. Here’s a detailed procedure to carry forward the CENVAT credit and how to reflect it in service tax returns for both entities:

### Procedure to Carry Forward CENVAT Credit to Pvt. Ltd.

1. **Eligibility for Transfer**: Ensure that the CENVAT credit pertains to input services or goods received and used in the provision of taxable services. The credit balance should be properly accounted for and reflected in the partnership firm’s books.

2. **Conversion to Pvt. Ltd.**: When converting from a partnership firm to a Pvt. Ltd. company, the CENVAT credit balance cannot be directly transferred. Instead, the Pvt. Ltd. company can avail of the CENVAT credit based on the provisions under Central Excise and Service Tax rules.

3. **Inventory and Records**: Conduct a thorough inventory of CENVAT credit available in the partnership firm. Maintain proper records of all invoices and documents supporting the CENVAT credit.

4. **Transfer of Assets and Liabilities**: As part of the conversion process, ensure that all assets and liabilities, including CENVAT credit, are properly accounted for and transferred to the Pvt. Ltd. company.

5. **Intimation to Jurisdictional Authorities**: Notify the jurisdictional Central Excise or Service Tax authorities about the conversion from partnership firm to Pvt. Ltd. company. This notification typically involves filing Form ST-1 or relevant forms as per GST rules, informing about the change in entity type.

6. **Availing CENVAT Credit by Pvt. Ltd.**: Once the Pvt. Ltd. company is registered and operational, it can start availing CENVAT credit on eligible inputs and input services used in the course of its business. This credit can be utilized for payment of service tax liabilities.

### Service Tax Return Filing

1. **Partnership Firm**: Before conversion, the partnership firm should continue to file service tax returns (ST-3) as per regular compliance requirements. Report the utilization of CENVAT credit in these returns as applicable.

2. **Pvt. Ltd. Company**: After conversion, the Pvt. Ltd. company will need to register separately for service tax under its new entity name and GSTIN (Goods and Services Tax Identification Number). File service tax returns (now GST returns under GST regime) in the name of the Pvt. Ltd. company and report the availed CENVAT credit in these returns.

3. **Transition and Compliance**: During the transition phase from partnership firm to Pvt. Ltd. company, ensure there is no gap in compliance. File all necessary forms and returns timely to avoid penalties and maintain continuity in tax compliance.

### Summary

- CENVAT credit cannot be directly transferred from a partnership firm to a Pvt. Ltd. company. The Pvt. Ltd. company needs to avail the credit based on its own registrations and compliance.
- Maintain proper records of CENVAT credit during and after the conversion process.
- Notify the tax authorities about the change in entity type and comply with all regulatory requirements for seamless transition.

For specific procedural details and forms applicable to your situation, it’s recommended to consult with a qualified tax advisor or chartered accountant who can provide guidance tailored to your business circumstances and ensure compliance with current tax laws and regulations.