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CENVAT CREDIT IN RESPECT OF SERVICE TAX

CENVAT CREDIT IN RESPECT OF SERVICE TAX:

Dear Professional Colleague,

Credit of EC & SHEC can be used for payment of Service Tax:

SERVICE TAX WORKS CONTRACT AND VALUATION OF SERVICES

With the underlying theme of setting the stage for GST, the union budget 2015 had proposed to do away with the EC & SHEC. While withdrawal of Cess on excise duty has been made effective from March 1 2015, Cess on service tax has also been withdrawn from June 1, 2015.

The act of withdrawal of cess presented the industry at large with the bouquet of concerns in view of the provisions of the Rule 3(7)(b) of the Cenvat Credit Rules 2004, which permitted the utilization of cenvat credit of Excise duty/Service Tax for payment of cess but not vice versa.

In this regard, the central government vide notification no. 12/2015, Central Excise dated April 30 2015, had amended the Cenvat Rules to allow use of credit of cess charged on inputs, input services & Capital goods on or after March 1 2015 in the factory for payment of Excise duty on or after March 1 2015. However the situation was not made clear regard to EC & SHEC charged on inputs, input services & capital goods for payment of service tax. Now the central government vide notification No.22/2015, Centarl Excise dated October 29, 2015 has amended the Cenvat credit rules once again to use credit of EC & SHEC charged on inputs, input services & capital goods on or after June 1 2015 for payment of output service tax on or after June 1 2015.

What will be the fate of balance of cess lying unutilized in Cenvat Credit account as on February 28 2015/June1 2015 respectively?

While the aforesaid amendment allows utilization of credit of EC & SHEC on or after June 1 2015, it fails to clarify about the destiny of unutilized amount of Cess in Cenvat Credit account as on February 28 2015/June 1 2015.

It is expected that the board will issue appropriate clarification at the earliest to the stated issue.

Hope this information will assist you in your professional endeavors.

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