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plz help me

shilpa singhvi (research analyst) (24 Points)

23 September 2010

hi, friends plz send me Cenvat entries

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CA Navin Jain (MANAGER (FINANCE & ACCOUNTS)) (11768 Points)
Replied 23 September 2010

AT TIME OF SALE

BANK-DR

TO SALE

TO VAT/ EXCISE (PAYABLE)

AT THE TIME OF PURCHASE

PURCHASE - DR

VAT / EXCISE (rECOVERABLE)

TO BANK

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RAMESH KUMAR VERMA ( CS PURSUING ) (43853 Points)
Replied 24 September 2010

Definition:-

CENVAT (Central Value Added Tax) Credit Means, Input tax of purchase of Raw 
Materials, Packing Material, Fixed Assets and Consumables. This Input tax credit 
we can setoff the tax payable which we have to pay to the government.

Illustrative example of Entries for Cenvat:-

The Guidance Note gives an illustration of entries. The illustration is on the assumption that there is opening stock of 10 units purchased at Rs 10 per unit plus Rs 2/- excise duty, aggregating to Rs 12/-. 100 units of raw materials are purchased at Rs. 10 per unit, plus Rs. 2 for excise duty, aggregating to Rs. 12/-. Out of these, 70 units are consumed in process involving manufacture of 70 items of final product. These 70 units of final product are sold @ Rs. 15/- per unit, inclusive of excise duty of Rs. 3/- per unit. The Cenvat credit has been utilised fully for payment of duty on final products. The entries will be as follows :

Cenvat on inputs - Entries in respect of Cenvat on inputs are as follows - (This was termed as Method I as per 1995 guidelines).

Purchase of raw materials , Dr., Rs. 1,000,

Cenvat Credit Receivable, Dr., Rs. 200,

To Sundry Creditors , Cr., , Rs. 1,200

(Being purchase of 100 units), , ,

Excise Duty Paid on final products, Dr., Rs. 210,

Cenvat Credit Receivable Account , Cr., , Rs. 210

The P&L account will look as follows :

To Opening stock of Raw Materials (10 units), Rs. 100,

To Purchase of Raw Materials (100 units), Rs. 1000,

Less : Stock of Raw Materials (40 units), Rs. 400,

Net Consumption of RM (70 units) , , Rs. 700

Excise Duty paid, , Rs. 210

In the Balance Sheet, the stock of materials will be shown at Rs. 400/-.

In the Cenvat Credit Receivable Account, opening debit balance will be Rs 20 (in case of 10 pieces pf opening stock). During the period, there will be debit of Rs 200 in respect of inputs purchased during the year. This account will be credited by Rs 210 as the duty was paid on 70 pieces from Cenvat credit account. Thus closing debit balance will be Rs. 10/- in the Cenvat Credit Receivable account will be shown as asset under 'Loans and Advances'. Thus, total ‘assets’ will be Rs 410.

Accounting of Capital Goods -

In case of capital goods, the entries will be different. Cenvat credit on capital goods can be taken in two stages - 50% in current year and 50% in subsequent year.

Definition of capital goods as per Income Tax (which is also followed for Company Law purposes) is different from definition of Capital Goods under rule 57AA(a) [earlier 57Q] of Central Excise for purposes of Cenvat. e.g. items like consumable, spare parts, tools are defined as 'capital goods' for Cenvat on capital goods but not considered as 'capital goods' in regular accounts. Thus, the entries will depend on whether the definition is same or different.

(A) If capital goods as defined in regular accounts are same as capital goods as per Cenvat -

Purchase of capital goods, Dr., Rs. 1,000,

Cenvat Credit Receivable, Dr., Rs. 100,

(Capital goods) account, , ,

Cenvat Credit on capital, Dr., Rs. 100,

goods deferred account, , ,

To Sundry Creditors, Cr., , Rs. 1200

(Being purchase of capital goods), , ,

, , ,

Excise Duty Paid on final products, Dr., Rs. 80,

Cenvat Credit Receivable , Cr., , Rs. 80

(capital goods) account, , ,

In the balance sheet, capital goods will be valued net of excise duty and depreciation will automatically be provided on net value only. Unadjusted balance of Rs 20/- standing in the Cenvat credit receivable (Capital Goods) Account will be shown on assets side under the head 'Loans and Advances'. Similarly, debit balance of Rs 100 in Cenvat Credit on capital goods deferred account will be shown as current asset under Loans and Advances'.

In next year when balance Cenvat credit is availed, amount of Cenvat credit availed should be credited to 'Cenvat Credit on capital goods deferred account' with corresponding debit to 'Cenvat credit Receivable (Capital Goods) Account.

(B) If capital goods as defined in regular accounts are different from capital goods as per Cenvat - In such cases, the item will not be capitalised in books of account and will be written off in accounts.

If 100 units of 'tools' are purchased which are treated as 'consumables' in accounts, but 'capital goods' for purpose of excise law, and if stock is 40 units at the year end, the entries in books of account will be as follows -

Purchase of tools, Dr., Rs. 1,000,

Cenvat Credit Receivable (capital goods) account, Dr., Rs. 100,

Cenvat Credit on capital goods deferred account, Dr., Rs. 100,

To Sundry Creditors , Cr., , Rs. 1200

(Being purchase of 100 units), , ,

, , ,

Excise Duty Paid on final products, Dr., Rs. 80,

Cenvat Credit Receivable Account, Cr., , Rs. 80

The P&L account will look as follows :

To Purchase of tools, Rs. 1,000,

Less : Stock of tools, Rs. 400,

Net Consumption of tools, , Rs. 600

Excise Duty paid, , Rs. 80

In the Balance Sheet, the stock of tools will be shown at Rs. 400/- Unadjusted balance of Rs 20/- standing in the Cenvat credit receivable (Capital Goods) Account will be shown on assets side under the head 'Loans and Advances'.

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