Cenvat Credit Rules, 2004 - Simplified scheme for refunds

Posted on    16 March 2012

F. Cenvat Credit Rules, 2004:


F.1. Simplified scheme for refunds:


1.  A simplified scheme for refunds is being introduced by substituting the entire Rule 5 of CCR, 2004. The new scheme does not require the kind of correlation that is needed at present between exports and input services used in such exports. Duties or taxes paid on any goods or services that qualify as inputs or input services will be entitled to be refunded in the ratio of the export turnover to total turnover.


2. The notification prescribing the detailed manner and safeguards will be issued by the Policy wing shortly.


F.2. Other changes:


3.  Presently credit on all motor vehicles is not available except to a few specified service providers. This is being liberalised and credit on motor vehicles, other than those falling under tariff heading 8702, 8703, 8704, 8711 and their chassis, will be allowed. The credit of service tax paid on their hiring, insurance and repair will also be allowed.


4. Following credits in respect of vehicles will also be allowed:


i. of insurance to motor insurance companies (as re-insurance and third party insurance) and manufacturers (as in-transit insurance);


ii. of repair of vehicles to manufacturers in respect of motor vehicles manufactured by them and to insurance companies in respect of motor vehicles insured /re-insured by them.13


5.  Presently credit on goods can be taken only after they are brought to the premises of the service provider. Sub-rules 4(1) and 4(2) have been amended to allow credit without bringing them into premises subject to due documentation regarding their delivery and location.


6.  Rule 9(1)(e) is being amended to allow availment of credit on the tax payment challan in case of payment of service tax by all service receivers on reverse charge.


7.  Changes are being made in Rule 7 relating to distribution of credits of input services by an input service distributer (ISD) to ensure their scientific allocation to only such units where they have been put to use and proportionate to turnover. For example in case of services by way of advertisement


i. if the advertisement is for a product or service provided from only one unit, the said credit shall be distributed only to that unit; and if two units, the said credit shall be distributed only to those two units, in proportion to the respective turnovers;


ii. if the advertisement is for the company as such, the said credit shall be distributed only to the extent of the turnover of units registered and entitled to avail Cenvat credit to the total turnover of the company including unregistered units.


8. These changes will be effective from 1.4.2012.


9. Additionally, there are other changes which have implication largely in respect of central excise but may also touch upon service tax. These may be referred to in JS, TRU-I’s letter.

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