Eou & service tax credit...

This query is : Open

Nitin Garg (Querist)
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23 January 2014 a manufacturing concern, which is eou, taking services from parties and paying serive tax.... my que is:- how we can avail service tax credit bcz we have 100% export sales....

Ankit Varia

Ankit Varia (Expert)
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23 January 2014 At present, EOUs ( including STP/EHTP units) are allowed to import as well as procure goods from domestic tariff area without payment of duty. Therefore, there was no necessity for extending CENVAT credit facility to them. However, some EOUs have to procure their raw materials on payment of duty also. As a trade facilitation measure, it has been decided to allow EOUs (including STP/EHTP units) an option either to procure the goods from DTA without payment of duty under CT-3 procedure or to procure the goods on payment of duty and avail CENVAT credit. The credit could be utilized by them as per the Cenvat Credit Rules, 2004, including payment of duty on their DTA sales .

The EOUs can also take credit of the Service Tax borne by them which will in effect provide them relief from Service Tax.

� As per Rule 3 of the Cenvat Credit Rules, a manufacturer or producer of final products is allowed to take the credit of duty paid on the inputs.

� There is no restriction in the rule in relation to EOUs. They are also manufacturers registered under Central Excise.

� As per Rule 17 of the CE Rules, EOUs can use the credit to pay duty for DTA clearances

� EOUs can get their inputs without payment of duty under CT-3. This is an exemption notification and there is no stipulation that the EOU shall avail this for all their inputs.

� Nowhere in the rules or instructions is there a mention that if the EOU gets some inputs on payment of duty, they cannot get other inputs without payment of duty.