Mfg. two unit use same boiler steam
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 January 2016
we are two mfg. Unit both are difference entity partnership firm but different partner's both unit are chemical mfg. with different excise number & Local Numbr. In one unit purchase coal/Wood base boiler ( capital goods ) for steam use in mfg. activity. at that time second unit are required for steam use in own mfg. production. we are not cenvat credit claim for boiler in first unit.
second unit not afford the wood boiler in here my question can i pass on steam first unit to second unit through GI Pipeline and second unit use that stem as in own mfg. process and second unit payment to first unit for steam charges as a invoice issue for steam issue by first unit.
in here clarify that we are only supply stem to first unit to second unit through pipe line not any inter transfer single exciseable/no exciseable goods supply to both unit. any legally possible of if yes so any excise liability or any processor are required for use this steam.
devang shah
second unit not afford the wood boiler in here my question can i pass on steam first unit to second unit through GI Pipeline and second unit use that stem as in own mfg. process and second unit payment to first unit for steam charges as a invoice issue for steam issue by first unit.
in here clarify that we are only supply stem to first unit to second unit through pipe line not any inter transfer single exciseable/no exciseable goods supply to both unit. any legally possible of if yes so any excise liability or any processor are required for use this steam.
devang shah
17 January 2016
On the basis of invoice or challan second unit can take the cenvat credit.
Querist : Anonymous
Querist :
Anonymous
(Querist)
18 January 2016
sir at present we are not credit taken or pass on issue in example
ABC Ltd and XYZ Ltd mfg. Unit near by and both mfg. excise number differ ABC LTD. purchase boiler and install its own premises and generate steam for own production and excess Boiler Steam pass on to XYZ Ltd. Mfg. unit location thought Pipe line. my question any Excise & Local Gujarat Vat Rule it is possible said pass stem one unit to another unit if yes how to issue Invoice and in excise and vat which Tax Liability generate ABC Ltd. and XYZ Ltd. please it is possible detail answer a query.
devang shah
ABC Ltd and XYZ Ltd mfg. Unit near by and both mfg. excise number differ ABC LTD. purchase boiler and install its own premises and generate steam for own production and excess Boiler Steam pass on to XYZ Ltd. Mfg. unit location thought Pipe line. my question any Excise & Local Gujarat Vat Rule it is possible said pass stem one unit to another unit if yes how to issue Invoice and in excise and vat which Tax Liability generate ABC Ltd. and XYZ Ltd. please it is possible detail answer a query.
devang shah
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 January 2016
Please solve said query
03 August 2024
In the context of two separate manufacturing units operating under different entities, your query pertains to the transfer of steam generated from a boiler in one unit to another unit. Here is a detailed breakdown of the regulatory and compliance aspects related to this scenario:
### 1. **Transfer of Steam Between Units**
**Regulatory Aspects:**
- **Excise Duty:** Since steam is not classified as a taxable commodity under the Central Excise Act, there is no direct excise duty liability on the supply of steam. However, if the steam is used in the manufacturing process, the related expenses should be properly accounted for.
- **Value Added Tax (VAT):** In Gujarat, steam itself is not a taxable commodity under VAT. However, any service charges or consideration paid for the steam might be subject to VAT or Service Tax, depending on the nature of the transaction.
**Procedure:**
1. **Documentation and Invoicing:**
- **Invoicing:** Even though steam is not an exciseable or VAT commodity, it is advisable to issue an invoice from the supplying unit (ABC Ltd) to the receiving unit (XYZ Ltd) for the steam supplied. This invoice should detail the quantity of steam supplied and the rate charged for the steam.
- **Service Agreement:** A formal service agreement or contract should be in place to outline the terms and conditions of the steam supply, including the pricing and payment terms.
2. **Accounting and Payments:**
- **Payment for Steam:** XYZ Ltd should make payments to ABC Ltd for the steam supplied based on the agreed terms. This payment is typically treated as a service charge or reimbursement for the cost of generating steam.
- **Expense Recording:** Both units should record the transaction appropriately in their financial records. ABC Ltd will record the income from the steam supply, while XYZ Ltd will record the expense.
3. **VAT and Service Tax Implications:**
- **Service Tax:** If the payment for steam is considered a service provided by ABC Ltd, Service Tax might be applicable on the service charges. However, in many jurisdictions, Service Tax might not apply if the payment is considered as a reimbursement rather than a service.
- **VAT:** Since steam itself is not a VATable item, VAT may not be applicable. However, the charges for the steam might be subject to VAT, depending on local VAT regulations.
4. **CENVAT Credit:**
- **CENVAT Credit on Boiler:** Since CENVAT Credit on capital goods (such as a boiler) is a common concern, ensure that the credit is not claimed if the boiler is used solely for producing steam for a unit not eligible for CENVAT credit. Proper documentation and accounting should be maintained to avoid issues.
5. **Local Regulations (Gujarat VAT):**
- **Local VAT Rules:** Verify local VAT rules with regard to the treatment of service charges for steam or related expenses. Local VAT authorities can provide specific guidance on whether VAT is applicable to the service charges or any other aspect of the transaction.
### Summary:
- **Invoicing:** Issue an invoice from ABC Ltd to XYZ Ltd for the steam supplied, detailing the quantity and charges.
- **VAT and Service Tax:** Check local VAT and Service Tax regulations to determine applicability. Service charges may be subject to VAT or Service Tax.
- **CENVAT Credit:** Ensure no CENVAT Credit is claimed if the steam is not used for production in a unit claiming CENVAT Credit.
- **Documentation:** Maintain proper documentation for the transaction and comply with local VAT and Service Tax regulations.
Consult with a tax advisor or legal expert for detailed guidance and to ensure compliance with all applicable regulations in your jurisdiction.
### 1. **Transfer of Steam Between Units**
**Regulatory Aspects:**
- **Excise Duty:** Since steam is not classified as a taxable commodity under the Central Excise Act, there is no direct excise duty liability on the supply of steam. However, if the steam is used in the manufacturing process, the related expenses should be properly accounted for.
- **Value Added Tax (VAT):** In Gujarat, steam itself is not a taxable commodity under VAT. However, any service charges or consideration paid for the steam might be subject to VAT or Service Tax, depending on the nature of the transaction.
**Procedure:**
1. **Documentation and Invoicing:**
- **Invoicing:** Even though steam is not an exciseable or VAT commodity, it is advisable to issue an invoice from the supplying unit (ABC Ltd) to the receiving unit (XYZ Ltd) for the steam supplied. This invoice should detail the quantity of steam supplied and the rate charged for the steam.
- **Service Agreement:** A formal service agreement or contract should be in place to outline the terms and conditions of the steam supply, including the pricing and payment terms.
2. **Accounting and Payments:**
- **Payment for Steam:** XYZ Ltd should make payments to ABC Ltd for the steam supplied based on the agreed terms. This payment is typically treated as a service charge or reimbursement for the cost of generating steam.
- **Expense Recording:** Both units should record the transaction appropriately in their financial records. ABC Ltd will record the income from the steam supply, while XYZ Ltd will record the expense.
3. **VAT and Service Tax Implications:**
- **Service Tax:** If the payment for steam is considered a service provided by ABC Ltd, Service Tax might be applicable on the service charges. However, in many jurisdictions, Service Tax might not apply if the payment is considered as a reimbursement rather than a service.
- **VAT:** Since steam itself is not a VATable item, VAT may not be applicable. However, the charges for the steam might be subject to VAT, depending on local VAT regulations.
4. **CENVAT Credit:**
- **CENVAT Credit on Boiler:** Since CENVAT Credit on capital goods (such as a boiler) is a common concern, ensure that the credit is not claimed if the boiler is used solely for producing steam for a unit not eligible for CENVAT credit. Proper documentation and accounting should be maintained to avoid issues.
5. **Local Regulations (Gujarat VAT):**
- **Local VAT Rules:** Verify local VAT rules with regard to the treatment of service charges for steam or related expenses. Local VAT authorities can provide specific guidance on whether VAT is applicable to the service charges or any other aspect of the transaction.
### Summary:
- **Invoicing:** Issue an invoice from ABC Ltd to XYZ Ltd for the steam supplied, detailing the quantity and charges.
- **VAT and Service Tax:** Check local VAT and Service Tax regulations to determine applicability. Service charges may be subject to VAT or Service Tax.
- **CENVAT Credit:** Ensure no CENVAT Credit is claimed if the steam is not used for production in a unit claiming CENVAT Credit.
- **Documentation:** Maintain proper documentation for the transaction and comply with local VAT and Service Tax regulations.
Consult with a tax advisor or legal expert for detailed guidance and to ensure compliance with all applicable regulations in your jurisdiction.
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