How does CENVAT Credit work?
Wednesday, January 04, 2017     Category : Export India

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Functions of CENVAT


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How does CENVAT Credit workCENVAT means Central Value Added Tax.

 

CENVAT credit is a credit in respect of central excise on inputs purchased for the manufacture or duty paid in relation to the manufacture of the final product. CENVAT credit is also available in respect of duty paid on capital goods, which include machinery, plant, spare parts of machinery etc. in other words, instead of paying cash towards central excise on shipment of goods, the exporter can adjust the excise duty paid on the inputs and machinery. Virtually, CENVAT CREDIT is like a credit balance in bank account that can be adjusted towards the excise duty payable.

 

Let me explain how does CENVAT credit scheme work? . ABC Ltd is the manufacturer and exporter of toys and it purchases certain components from PQR Ltd for use in manufacture of toys. PQR Ltd would have paid excise duty on components manufactured by it and it would have recovered that excise duty in its sale price from ABC Ltd. Now, ABC Ltd has to pay excise duty on toys manufactured by it as well as bear the excise duty paid by its supplier, PQR Ltd. This amounts to multiple taxation. ABC Ltd can take credit for excise duty paid by PQR Ltd so that lower excise duty is payable by ABC Ltd, at the time of export. This is how CENVAT CREDIT works.

 

Under CENVAT Credit scheme, the benefit of excise duty on inputs is available, instantaneously, when the inputs reach the factory. There is no need to establish any linkage between the inputs and goods manufactured . In case of capital goods, 50% benefit is available in the current year of purchase and balance in the next year. This balance can be adjusted against the duty payable but is not refunded. So, it is desirable to utilize this balance, at the earliest.

 

In other words under a CENVAT CREDIT scheme, exporter is totally freed from the burden of excise duty, at all the different stages, on inputs used, duty paid on final products and even duty paid on capital goods purchased. Under a CENVAT credit scheme, the intention of Government is to eliminate the burden of excise duty on exports totally, paid directly or indirectly, to make them globally competitive.  Also read  2 CENTRAL EXCISE CLEARANCE OPTIONS for Exports in India    Central excise clearance  options    CENTRAL EXERCISE CLEARANCE PROCEDURES for Export in India – Part 2    CENTRAL EXERCISE CLEARANCE PROCEDURES for Export in India – Part 1    Procedure for Central Excise Clearance Under Claim of Rebate

 

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Comments

 
pankaj pandya Says :
Friday, November 01, 2013
we will be use raw material for manfufacture product and final compontes product. so that in case it will be rebate cenvat credit please give me reply and we are exporter so it will be possible cenvat credit.
tushar tatiya Says :
Tuesday, November 19, 2013
Hello Sir, Referring to this article I just want to know when PQR charge excise duty in its sale price from ABC same thing ABC would have been doing with there customer. ABC also would have add that duty in his sale price in that case ABC is not paying extra. Can you clear my this doubt. Hope I am clear to you. Thank You
NAKUL KHATRI Says :
Monday, November 25, 2013
Dear Respected members, It was really a value addition for me.I did not know about this earlier. We are the manufacturer of Automatic Paper folding machines in india. We export machineries in various parts of world. I need to know the procedure of availing this benefit??? Can you please tell me the procedure?? Thanks in advance.
Govind Says :
Saturday, January 25, 2014
Please clarify, we need to import the R.M / Captial Goods or it can be procured from domestic to avail the CENVAT Credit. In the above example - PQR Ltd is a domestic supplier?
Surendran Kollerath Says :
Saturday, March 08, 2014
Hi Nakul Khatri, Contact an excise consultant near your place to guide you.
sanjay sherasia Says :
Wednesday, April 16, 2014
respected sir, give me details about excise duty calculation
Prasad Says :
Tuesday, May 27, 2014
Hi Sir, I'm trader and im planning to supply oils to the company so in my case i purchase the oils from manufacturer or distributor and that i supply to the company, so as a trader how can i avail the CENVAT Credit? for this do i need to register for any excise regulatory? Please help me out on this... Thanks
Mayadhar Mantri Says :
Wednesday, June 04, 2014
We have import a spare parts of machinery on free of cost. The exporter has paid import duty whatever duty arrived at the time of import. Please advice whether we can avail cenvat on bill of entry or not. Thanks, M. Mantri
Harikrishnan V A Says :
Wednesday, October 01, 2014
Sir, I'm working in the procurement section of a Power Transfomer manufacturing firm situatd in Kerala. We source most of the raw materials from north indian suppliers/manufactirers. Most of our customers are also in Northern side of India. Transformer oil is one of the rawmaterial and which we just fill in the tank of the transfoemr before dispatch. This can be done from the site/customer's end also. If we could dispatch the same from our supplier to customer's site huge amount of freight can be saved. Is there any provision to avail CENVAT credit for direct dispatch of oil from our supplier to customer as we are un necessarily wasting our money (freight) and time ( travel time).
Ravi Lought Says :
Thursday, February 12, 2015
I am a new beginner and don't have enough money for CST and VAT no. Can I import form china (imitation diamonds (tax free) with CST and VAT no ?I Have IEC no and Current Acc. I have my shop act license in the name of myself i am a sole proprietor of my firm and my firm is register on my house address.Please advice me can i import with CST and VAT No.
DNP sojan Says :
Monday, February 16, 2015
Iam planning to start import and export bussiness,basic step for regester properiter company, vat ,cst , tin, sale tax
Sachin Says :
Wednesday, February 18, 2015
I want start export business of agriculture products I take gumsta licence and iec ,current a/c . I got one client from Dubai . My question is sales/vat registration is mandatory ? Because is so costly 35 to 40 thousand for registration . Without registration can I export ? It's sole propiter company
Bhavin Doshii Says :
Thursday, February 19, 2015
I am new to the online business model and started my online business with sites like eBay and Amazon here in India. I come to know about many sellers who import items from USA or UK and selling it online. I also ordered some items from them but when I ask them about the VAT bill, they inform me that they import goods in my name and they can not provide me the VAT invoice. And the products are personal use and not for resale. They list the items which are available in USA and they must be calculating the courier cost, duty and their profit and list for online sale in Indian currency and when buyer buy this item, they purchase it from the seller in USA and ship it to India and deliver it to the buyer. Buyer will pay the fix price and custom clearance will be done by seller. I can not compete them and planning to start this business but I am not getting any information about how can I start this business. I need some expert advice on this and need information and guidance in starting this business. Your advice is highly appreciated.
rajeshthakurpnvl2013@gmail.com Says :
Thursday, February 26, 2015
Dear sir, We are trading Tin Plate Sheet (Which used for to make Tin Dibba) We Imports Tin Plate Sheet. So please help me which duty (CVD) to take CENVAT credit. & Pass on Duty. Also in some Import Invoice shown DEPB Scheme (Duty Draw Back) In this Invoice CVD 12% Show Nill But 4% shown. So please tell me how to take CENVAT credit for this Invoice Thanks Rajesh Thakur
sanjay rout Says :
Friday, April 03, 2015
I am doing my business for Medical equipment. When I will purchase this inst that time I have to pay customs duty, how I will get benefit the duty, shall I issue a Cenvat gate pass ? If my client does not have the Excise details then how they will get benefit for the same, which I have purchased with customs duty. Kindly Reply, Regards, Sanjay
ramesh.K Says :
Monday, June 08, 2015
Respected sir i am purchase some Goods from out of country but i am paying taxes like CVD Educational,customs Educational cess,additional Duty (imports) how to get input (i am service Provider)
Jeyaprakash Muthuswamy Says :
Tuesday, July 21, 2015
I have decided to start an export business and got my IE code for my new Company. Now I have some doubts to start with the export. I believe you will clarify and help me on these doubts. 1. Is CST,VAT and TIN registration mandatory for only export? Is yes is there any way we can do export without these? 2. If no, what are the documents used to product movement from one place (may be from other states) to the port? 3. Can I export multiple products(say groceries, veg, etc) with minimum quantity for personal use? (I want to start with minimum quantity to my friends in abroad) 4. How can I find the buyers who requires minimum quantity (within 1000 kg) Please clarify me these doubts at your earliest convenience.
Bhat Says :
Wednesday, August 19, 2015
I need small calrification on excise duty and CENVAT. I am supplier to tractor manufacturer orginated in India. He sell tractors to all market in India as well as few outside countries. I started supplying recently to them and he is saying all my quote should be inclusive of all taxes & duties. When I enquired he says he is not able claim ED/CVD CENVAT benefits because he is farm equipment mfg & get diff benefits from Govt of India. I am not able to get his point. Can you please calrify.. If he is not claiming CENVAT can I get/should I ask some documents to submit to excise so that I also get benefited.
mrs.hetal barot Says :
Thursday, August 27, 2015
i have confusion for cenvet credit. guide me please. manufacture sales - dealer A dealer A sale - dealer B dealer B - Branch transfer branch transfer e sales - consumer my question consumer valid for cenvet credited? a waiting your reply.
Pratima Says :
Tuesday, October 13, 2015
Dear Sir, Now i am doing export with excise duty and need to get refund. Please provide me procedure. Thanks & Regards Pratima
Pratima Says :
Tuesday, October 13, 2015
Dear Sir, Now i am doing export with excise duty and need to get refund. Please provide me procedure. Thanks & Regards Pratima
khizer ahmed Says :
Thursday, October 15, 2015
I am 28 Yrs old working in a manufacturing company, i started an export trading company a year back & have been able to generate small orders & working on them. I want to know if i buy finished goods for the purpose of exports, should i need to pay all the taxes?(VAT, ED), if not how can i exempt from this, some one told me there is an H form available, how to get that H form. No one is giving proper guidance, kindly guide me, i have been paying all the taxes until now. Also i want to know how to file the tax returns, the consultant who helped us in our registration procedure is not providing us with proper details.
utsav shah Says :
Thursday, October 15, 2015
Sir,your idea really inspire me..i wad thinking at begining that import and export is a big thing..but your information make everythning eazy for me..nd motivate me to do something..i am currently doing wholesale bussiness of mens casual shirts in ahmedabad..and now i am planing for manufacturing by my onw..and then export it to other country..sir ..can u please give me a information about how i can start this business as a register conpany and then apply for IEC .because till today...i have not pass throw any government process..means licences,company,vat,tin,etc...i request you to gave me a suggestion and a advice for this planning..
vikas kumar verma Says :
Tuesday, November 24, 2015
I HAVE A QUESTION ABOUT EXPORT SHIPMENT......> SUPPOSE THAT WE IMPORTED SOME MACHINERY FROM CHINA AND 2-3 YEARS AFTER USE OF THE MACHINE MY PLANT. AFTER THAT I HAD OPEN ABORD OUR BRANCH OFFICE AND WHAT TO EXPORT 2ND COUNRTY THAN WE CAN AVAIL EXPORT INCENTIVE OR ITS CALLED EXPORT / REXPORT. HOW WE CAN PROCEED IT PLEASE SUGGEST YOUR BETTER OPTION WITH GET IT BENEFIT IF POSSIBLE AS PER GOVT. RULE ACT 1986.
santosh acharekar Says :
Monday, December 07, 2015
Could you guide me on duties and tax calculations on import goods , whether CVD and additional CVD to be taken in product pricing or not because I was told that CVD and additional CVD are refundable . Appreciate your guidance.
Prashant Sanghavi Says :
Tuesday, January 26, 2016
I want to export false ceiling sections to Asian countries. But how. I have got all the machineries. But I don't know how to export
GK Saxena Says :
Friday, April 01, 2016
Dear sir, Can I get excise refund of excess cenvat without BRC we have submitted all export documents(shipping bill,bill of lading, ARE-1 etc.) or can be adjusted excess cenvat with another branch. Regards,
Digvijay Srivastava Says :
Wednesday, April 13, 2016
Dear Sir, Please suggest the whole procedure to get the benefit of Cenvat credit in export from beginning to end like which form is required to fil, documents required for submission and etc in case of dfia, depb and epcg and etc Kindly provide ur co contact number if possible. Best Regards.
VINOD KUMAR PURI Says :
Tuesday, April 19, 2016
WE ARE PURCHASING ELECT. MATERIALS AND OTHER CONSUMABLE MATERIAL FROM THE DEALER WHICH IS INCLUSIVE OF EXCISE DUTY AND THE GOVT. AGENCIES LIKE IOCL/HPCL/BPCL DEMANDS THE PERCENTAGE OF CNVAT TRANSFERRED TO THEIR ACCOUNT. WHAT IS THE PROCEDURE FOR GIVING THEM CNVAT CREIDT VINOD KUMAR PURI MANAGING DIRECTOR MOB: 9717698182
Manisha Gangaramani Says :
Wednesday, April 20, 2016
Can you pls help on below. 1)VAT/CST is applicable on ship Stores?? 2)Is it considered as Export or Deemed Export?? Business: Ship Chandling Description: Supplying Consumable Stores to Ship (arriving at Indian Ports). Materials: Mooring Ropes, Wire Ropes, Deck Stores, Cabin Store, Engine Stores, Ships Spare parts etc. Order Party/Purchaser: Foreign Company (Owner or managing company of the SHIP) Consignee: Master of the Vessel Delivery At: Any port of India, Vizag/Kolkata/Mumbai/Kandla etc. Vessel Run: Foreign Going Vessel Payment from: Foreign (from Owner or management company of the Ship) Payment Currency: US$ via Bank
Ethiraj S Says :
Friday, April 22, 2016
We are purchasing products from OEM with Excise Duty. If I want bill it to Customer with Excise Duty. whether I need Pass the same Excise Duty or it can be Increased/Decreased. Please suggest.
Rohit kasana Says :
Monday, May 02, 2016
Dear sir, pls tell can we take cenvat on reverse charge mechanism input services.
Selvam Says :
Tuesday, June 14, 2016
Good day. I am planning to import RBD Palm Olein from Malaysia to India for packaging and sold in the local market. The import tariff on the product in India is 20.6%. With the import tariff my cost per kg of RBD Palm Olein is coming up to INR65. However, my competitors and market rate of the RBD Palm Olein in India is INR58/kg. Would it be that my competitors are availing the CENVAT through which they could get certain credit? Or is there is any else that I am missing? Appreciate your guidance. Thanks
ARASU Says :
Thursday, June 16, 2016
Sir we are traders we import goods and for some clients we pass on the excise duty - want to know whether the cess charge of 2% and 1% is also eligible to be passed on or not eligible.
Ahad Basha Says :
Thursday, June 30, 2016
I AM A MANUFACTURER AND EXPORTER I BUY RAW MATERIALS WHICH INVOLVE EXCISE DUTY AND HOW I SHOULD TAKE THE CENVAT CREDIT WHEN ALL MY GOODS ARE EXPORTED
SACHIN Says :
Friday, July 15, 2016
Dear Sir, For example if A is a supplier, B is Buyer and C is ultimate client. All A, B & C are in India only. In case A supplies goods directly to C, can B avail cenvat credit.
avijeet sarkar Says :
Friday, July 29, 2016
We 're a mechanical engineering company providing service. Now, we're buying a product after paying ED @ 12.50 % & Vat @ 5%. We're going to sell this product to our client and bill him the amount, what our supplier has billed us, plus our profits. Now, we would like to know if we can get credit for CENVAT, if so then against what or how?
gourishankar Says :
Monday, August 08, 2016
How can the cenvat be refunded if the cenvat credit facility not availed by an expoter after goods are exported?
Anshul Medatwal Says :
Wednesday, September 14, 2016
If indian exporter sell goods to indian buyer but it export same otside the india then is excise duty lievable?
Mahendra boopathy Says :
Wednesday, January 04, 2017
We are constructing the factory. The Transformer, DG, Compressor, electrical wiring/Cabling are procured with excise duty. That Excsie duty can be utilized when we made sales
 

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