Rule 6 rates under Cenvat Credit Rules, 2004 to be reduced from tomorrow

By TIOL News Service

NEW DELHI, JULY 06, 2009: IN our DDT-1008 dated 10.12.2008, we had suggested that the amount payable under rule 6 of the Cenvat Credit Rules, 2004 needs a correction.

A bit of history carried by us in the said column regarding this amount payable percentage reads –

+  This 10% payment made its appearance when the CCR, 2002 gave way to CCR, 2004 on 10.09.2004.

+  Earlier, it was 8% since the day such a rule came into being on 01.09.1996 in the form of rule 57CC, 57AD of CER, 1944, rule 6 of CCR, 2001.

+  Incidentally, when it was made 10% on 10.09.2004, the 2% Education Cess was already in vogue since 09.07.2004. Although the Secondary & Higher Education Cess of 1% came to be imposed since 01.03.2007, the percentage of 10% amount still continued.

+ The Union Budget, 2008 also failed to address this 10% factor suggesting that it is an “amount fixed” and would remain constant, come what may.

+ Now, that the CENVAT duties have been reduced by four percentage points across the board, except, of course in respect of petroleum products, this 10% amount to paid on the value of the exempted goods certainly needs a correction.

We are happy to note that the Central Government has noticed this aberration and would be effecting the necessary changes by notification 16/2009-CE(N.T), dated 07.07.2009. The rates have been brought down for exempted goods and exempted services from 10 and 8 percentage points to five and six respectively.

The to be substituted rule 6(3)(i) of the Cenvat Credit Rules, 2004 would read thus –

“(i) the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six per cent of value of the exempted services; or”.

Now, should this progressive step be delayed by a day?