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Distribution of Credit by an ISD


CENVAT credit by units for ISD distribution

Thought provoking article and let me share following views

1.Rule 7 of CCR speaks about distribution of CENVAT credit taken by ISD. This rule itself does not allow CENVAT credit for units. For taking credit by units Rule 2(l) of CCR is applicable which requires nexus to qualify as input service.

2.Units manufacturing both excisable & exempted goods or rendering taxable & exempted services has to follow Rule 6 of CCR for ISD credit also. It is advisable to go for ISD rout only for common services used in multiple locations and which are not meant for exempted products at any of the units. Alternatively one can opt for payment of an amount equal to 6% of value of the exempted goods or services as required under Rule 6(3) (i) which will give relief from other cumbersome procedure given in other options of Rule 6. However this depends on economic viability based on quantum & value of the product.

3.Rule 7 of CCR has been amended effective Apr.2014 to distribute credit relaxing the nexus of actual usage of service by units without corresponding amendment in Rule 2(l) of CCR. Only distribution is taken care leaving CENVAT credit eligibility of units

Posted by
G.Mani

govindan_mani govindan_mani 29/10/2014

 

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