common goods used for taxable goods and tax-free goods

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Komal Kumari (Querist)
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16 April 2010 sir, purchase of raw materials (common goods) within state for manufacturing taxable goods as well as tax-free goods (exempt goods). How will input tax credit avilable to these goods, i mean in what proportion?

thanks in advance

Kamlesh Chokhani

Kamlesh Chokhani (Expert)
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17 April 2010 Dear Friend

Under central excise provision is as under which can be refferd to.

which state vat u are referring to

under Central excise

Credit for commpn input should be taken in the ratio of value of exepmted and dutiable value of finished products to total finished products.

Refer below provision and discussion of centavt credit rules 2004

If the final produts are common- dutiable as well as exempted these are the options:

1. maintain separate acounts for commpn input and take credit for inputs used only for dutiable products

2. If no separte accounts are maintained

2.1 the manufacturer of goods shall pay an amount equal to ten per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to eight per cent. of value of the exempted services; or

2.2 output service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A

(3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:-

(a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:-

(i) name, address and registration No. of the manufacturer of goods or provider of output service;

(ii) date from which the option under this clause is exercised or proposed to be exercised;

(iii) description of dutiable goods or taxable services;

(iv) description of exempted goods or exempted services;

(v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition;

(b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month,-

(i) the amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A;

(ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services (provisional)= (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the preceding financial year and D denotes total CENVAT credit taken on inputs during the month minus A;

Thx

kamlesh chokhani