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Cenvat credit

rohit laad (business) (67 Points)

18 April 2016

We are in business works contract of solar plants. Solar plants comes under exempted goods catagory as per excise act. but for installation of plant service is applicable to us. i.e means we have expempted product under excise but have taxable service of Installation of plant. my question is whether we are eligible of taking excise duty credit (charged on raw material used for manufacturing of Solar Plants) against service tax (charged on Installation of that plant.) Please advise with relevant reference. Thanks in advance.

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4 Replies

Harendra Kumar (Tax Advisor ) (1326 Points)
Replied 18 April 2016

If your finished goods is exempt then you could not claim the duty on exempt goods, further in service tax portion need to be analysis that you are also exempt in Service Tax or not. And also requested you to kindly examine the issue you fall under mega Exemption scheme or not ready very carefully Notification 25/2012.

Further if you having the queries please forward the same.

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Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 19 April 2016

The principle of credit is linked to payment of output tax. Where the material value is not being taxed under Service tax then credit under ST is not available for inputs used.

If one is paying duty on actual service value or on 40% of gross then input credit would not be available.

However capital goods used to construct + input services used directly + those specified would be eligible for set off.

rohit laad (business) (67 Points)
Replied 19 April 2016

Condition 1.

I usaully issue 2 separate bills I for Material & other for installation service.

1) Sale of Solar Power Plant (with not tax)

Excise duty is charged on purchase of raw material for such sale.

2) Intallation of Solar power plant with civil work. ( Service tax is payable on this service)

I want to take credit of excise duty paid in purchase of raw material consumed for solar plant against servie tax payable for installation of the same solar plant.

Whether in this condition Cenvat credit of Excise duty is available against service tax payable.

Condition 2:

Single Invoice raised under Works Contract scheme i.e. amount of material & service is not bifuracted. Excise is not charges as expempted good but service tax is charged.

Whether in this condition Cenvat credit of Excise duty is available against service tax payable.

( In both condition Service tax is payable on production of same product which is exempted form excise)

Please advice.

Venkatanarayana GM (Partner associate at Hiregange & Associates) (1279 Points)
Replied 21 April 2016

Mr. Rohit laad,

Your question is already answered.

reiteraterating, your not eligible to take cenvat credit on rawmaterials which are used for manufacturing of solar products because you are not paying any excise duty on your removals.

This is applicable in both the cases as mentioned by you above.

Furter, with regard to installation service, yes you avail credit on inputs and inputs services but the condition is that you should have directly and exclusively used only for providing of output service on which you have paid taxes.

With regard to capital goods, you can avail cenvat credit only when you have used those goods for providing taxable services and also for manufacturing of exempted goods.

Advise: Please take your list of capital goods, inputs, input services and seek your consultant to take decision in this regard.

Availement of ineligible credits would invite SCN from dept at later stage.