(IND) Working with Cenvat Credit

This chapter provides an overview of Cenvat credit and discusses how to:

See Also

(IND) Setting Up Country-Specific Functionality for India

(IND) Understanding Excise Tax

Click to jump to parent topicUnderstanding Cenvat Credit

The credit that can be claimed by a manufacturer, producer of final products, or a provider of taxable services is called Cenvat credit. A Cenvat credit can be applied against both excise and service taxes for these types of items:

Cenvat Credit on Common Inputs

You might use common inputs in the manufacture of excisable goods as well as in the manufacture of nonexcisable goods. In some cases, you might not be able to track the issue of the common inputs based on its end use. In such circumstances, you can claim Cenvat credit on the entire consignment and can issue such inputs for the manufacture of nonexcisable. To claim Cenvat credit on the entire consignment, you must calculate the excise duty liability at 10 percent of the value of the goods, excluding sales tax .

To claim Cenvat credit:

  1. Verify that the credit claimed during the procurement process are not off set.

  2. Define a price adjustment so that the system calculates 10 percent on the value of the item excluding sales tax.

    The system uses the price adjustment when you sell or transfer the goods.

Click to jump to parent topicAssigning Percentage of Cenvat Credit

This section provides an overview of how to assign the percentage of Cenvat credit and discusses how to assign the percentage of Cenvat credit to an item type.

Click to jump to top of pageClick to jump to parent topicUnderstanding the Assignment of the Percentage of Cenvat Credit

You use the Credit Distribution Percentage program (P75I011) to assign the percentage of Cenvat credit to an item type, such as CAP (capital goods) or INP (input). You can also use this program to:

Click to jump to top of pageClick to jump to parent topicForms Used to Assign the Percentage of Cenvat Credit

Form Name

FormID

Navigation

Usage

Work With Credit Distribution Percentage

W75I011A

Excise System Setup (G75IEXC4), Credit Distribution Percentage

Review existing records for item types and their associated tax types.

Credit Distribution Percentage

W75I011B

Click Add on the Work With Credit Distribution Percentage form.

Assign the percentage of Cenvat credit to an item type. Add or update records to transfer the credit of an item type from one tax type to another.

Click to jump to top of pageClick to jump to parent topicAssigning the Percentage of Cenvat Credit to an Item Type

Access the Credit Distribution Percentage form.

Model Year (YYYY)

Enter the model year of the appliance in the YYYY format.

Item Type

Enter a user-defined code from UDC table 75I/EA that identifies the type of item. Examples are:

AII: Account for Inputs

CII: Account for Capital goods

EDP: Excise Duty Payable

EXA: Expense Account

PLA: Personal Ledger Account

SRV: Accounts for Services

From Tax Type

Enter a user-defined code from UDC table 75I/GT that identifies the tax type. Values are:

AED: Additional Excise Duty

BED: Basic Excise Duty

Cess: Education Cess

CVD: Counter Veiling Duty

CVDCS: Education Cess - CVD

FT: Freight for JST adj

INTR: INTR:Interest - TDS

OTHROther - TDS

PF: Packaging & Forwarding

SED: Special Excise Duty

ST: Service Tax

STCS: Education Cess - ST

SURSurcharge

TCS: Tax Collected at Source

TDS:Tax Deducted at Source

TOT: Turn Over Tax

VAT: Value Added Tax

To Tax Type

Enter a user-defined code from UDC table 75I/GT that identifies the tax type. Values are:

AED: Additional Excise Duty

BED: Basic Excise Duty

Cess: Education Cess

CVD: Counter Veiling Duty

CVDCS: Education Cess - CVD

FT: Freight for JST adj

INTR: INTR:Interest - TDS

OTHROther - TDS

PF: Packaging & Forwarding

SED: Special Excise Duty

ST: Service Tax

STCS: Education Cess - ST

SURSurcharge

TCS: Tax Collected at Source

TDS:Tax Deducted at Source

TOT: Turn Over Tax

VAT: Value Added Tax

Annual Percentage

Enter the credit percentage that is used for distributing credit.

Click to jump to parent topicOffsetting Cenvat Credit and Calculating Duty Liability

This section provides overviews of VAT and Cenvat credit offset on raw materials, calculation of duty liability on manufactured goods, and calculation of duty liability on personal consumption of manufactured goods, lists prerequisites, and discusses how to:

Click to jump to top of pageClick to jump to parent topicUnderstanding VAT and Cenvat Credit Offset on Raw Materials

You use the Item used For Personal Consumption program (P75I309) to offset the Cenvat credit claimed during the procurement of raw materials in these scenarios:

Click to jump to top of pageClick to jump to parent topicUnderstanding Calculation of Duty Liability on Manufactured Goods

You use the Item used For Personal Consumption program (P75I309) to calculate the duty liability on manufactured goods for these scenarios:

Click to jump to top of pageClick to jump to parent topicUnderstanding Calculation of Duty Liability for Personal Consumption of Manufactured Goods

You must account for personal consumption of manufactured goods to calculate the duty credit offset. To generate stock transfers to account for the goods:

Click to jump to top of pageClick to jump to parent topicPrerequisites

Before you complete the tasks in this section:

  1. Define a separate branch/plant for personal consumption.

  2. Create a request for a stock transfer from the manufacturing branch/plant to the personal consumption branch/plant.

  3. Perform an inventory issue from the personal consumption branch/plant.

  4. Set the value of the processing option Consumption Mode to 0 to review existing records for purchase order receipts.

  5. Set the value of the processing option Consumption Mode to 1to review existing stock transfer orders.

Click to jump to top of pageClick to jump to parent topicForms Used to Offset Cenvat Credit and Calculate Duty Liability

Form Name

FormID

Navigation

Usage

Work With Purchase Order Receipts

W75I309A

Purchase tax (G75I2212), Item used For Personal Consumption

Review existing records for purchase order receipts.

Personal Consumption And Duty Credit Setoff - Inputs

W75I309B

Select a record on the Work With Purchase Order Receipts forms and click Select.

Review the offset Cenvat and Cenvat credits amounts claimed during the purchase.

Work With Stock transfers

W75I309D

Purchase tax (G75I2212), Item used For Personal Consumption

Review existing stock transfer orders.

Personal Consumption And Duty Credit Setoff - Manufactured items

W75I309E

Select a record on the Work With Stock Transfers form and click Select.

Calculate the duty liability for goods consumed.

Click to jump to top of pageClick to jump to parent topicSetting Processing Options for Item used For Personal Consumption (P75I309)

Processing options enable you to specify the default processing for programs and reports.

Defaults

Consumption Mode

Specify the mode of internal consumption to offset credit. Values are:

0: Offset credit on raw materials and other inputs.

1: Offset credit on manufactured items.

The purchase order receipts are the reference documents when you offset credit on raw materials.

The stock transfer orders to the internal consumption branch plant are the reference documents when you offset credit on manufactured items.

Tax Type

Additional Excise Duty

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the additional excise duty component of tax.

Basic Excise Duty

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the basic excise duty component of tax.

Special Excise Duty

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the special excise duty component of tax.

Education Cess

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the education cess component of tax.

Secondary Higher Education Cess

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the higher secondary education cess component of tax.

Click to jump to top of pageClick to jump to parent topicReviewing the Offset Cenvat and Cenvat Credits Amounts

Access the Personal Consumption And Duty Credit Setoff – Inputs form.

Reason Code

Enter a user-defined code from UDC table 75I/RC that identifies the duty or duty credit offset. Values are:

DOC: Non-Submission of Documents

EXMPT: Manufacture of Exempted Goods

INCON: Internal Consumption

Calculate Duty/Tax - Setoff

Consumption Qty(consumption quantity)

Enter the quantity of raw materials or finished goods used for personal consumption, that is, the goods not meant for sale.

Setoff VAT

Enter the total amount of duty charges liable for offset.

CENVAT Break up

BED

Enter the basic excise duty (BED). BED is an excise component that is applicable for any item.

CESS

Enter the education cess. Education cess is a tax component which can be levied on taxes or duties.

AED

Enter the additional excise duty (AED). AED is an excise component that is applicable for any item.

SED

Enter the special excise duty (SED). SED is an excise component that is applicable on any item.

Others

Enter any tax component to be used in future.

Click to jump to top of pageClick to jump to parent topicCalculating Duty Liability for Goods Consumed

Access the Personal Consumption And Duty Credit Setoff – Manufactured items form.

Reason Code

Enter a user-defined code from UDC table 75I/RC that identifies the duty or duty credit offset. Values are:

DOC: Non-Submission of Documents

EXMPT: Manufacture of Exempted Goods

INCON: Internal Consumption

Calculate Duty

Consumption Qty(consumption quantity)

Enter the quantity of raw materials or finished goods used for personal consumption, that is, the goods not meant for sale.

BED

Enter the basic excise duty (BED). BED is an excise component that is applicable for any item.

CESS

Enter the education cess. Education cess is a tax component which can be levied on taxes or duties.

AED

Enter the additional excise duty (AED). AED is an excise component that is applicable for any item.

SED

Enter the special excise duty (SED). SED is an excise component that is applicable on any item.

Others

Enter any tax component to be used in future.

Click to jump to parent topicOffsetting Cenvat Credit Against Excise Tax

This section provides an overview of how to offset Cenvat credit against excise tax, lists prerequisites, and discusses how to:

Click to jump to top of pageClick to jump to parent topicUnderstanding Cenvat Credit Offset Against Excise Tax

You use the Credit Distribution program (P75I012) to offset Cenvat credit for excise and services against the excise tax. For imports, you use this program to offset Cenvat credit for countervailing duty (CVD). You can also use this program to issue payments to the tax authority for any excise tax liabilities after offsetting the liabilities against Cenvat credit from excise and services. You can review all invoices for a particular period for which the excise has not been paid. You can make excise tax payments from the Cenvat accounts of raw materials, capital goods, and personal ledger account (PLA).

The excise-to-service transactions update the Credit Distribution table (F75I013). After you issue payments for excise or services, the system displays the voucher number generated when issuing payments to the tax authorities.

Note. You use the Credit Distribution Percentage program to define the percentage for CVD and services.

Click to jump to top of pageClick to jump to parent topicPrerequisites

Before you perform the tasks in this section, you must:

  1. Set up the excise unit and the branch/plant relationship.

  2. Update the debit amount with AR information and the credit amount with AP information at the recovery moment for the services in the Service Tax Cenvat table (F75I750).

  3. Complete the O2C and P2P cycles for excise and service taxes.

  4. Set up the credit distribution percentage.

Click to jump to top of pageClick to jump to parent topicForms Used to Offset Cenvat Credit Against Excise Tax

Form Name

FormID

Navigation

Usage

Credit Distribution - Excise

W75I012H

Excise periodic Processing (G75IEXC2H), Credit Distribution

Offset Cenvat credit for excise and services against excise tax.

Offset credits from different accounts and update the F75I750 table and the Excise - MODVAT/PLA Summary File table (F75I310Y).

Update the cross-transactional settlement details in the F75I013 table.

Update the Excise Payment Details table (F75I320Y).

Click to jump to top of pageClick to jump to parent topicSetting Processing Options for Credit Distribution (P75I012)

Processing options enable you to specify the default processing for programs and reports.

Defaults

Excise Unit

Specify the address book number of the excise unit.

Operating Unit

Specify the operating unit of services.

Service Category Code

Specify the a user-defined code from UDC table 41/01 that indicates the service category classification. Examples are:

01: Telephone

02: Transport

03: Cleaning

Tax Authority - Excise

Specify the address book number for the tax authority of the excise unit.

Tax Authority - Service

Specify the address book number for the tax authority of the service unit.

Tax Type

Additional Excise Duty

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the additional excise duty component of tax.

Basic Excise Duty

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the basic excise duty component of tax.

Special Excise Duty

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the special excise duty component of tax.

Education Cess

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the education cess component of tax.

Secondary Higher Education Cess

Specify a user-defined code from UDC table 75I/GT that identifies the tax type for the higher secondary education cess component of tax.

Counter Veiling Duty

Specify the user-defined code CVD (Counter Veiling Duty) from UDC table 75I/GT to indicate the tax type.

Education Cess on CVD

Specify the user-defined code CVDCS (Education Cess - CVD) from UDC table 75I/GT to indicate the tax type.

Service Tax

Specify the user-defined code ST (Service Tax) from UDC table 75I/GT to indicate the tax type.

Education Cess on ST

Specify the user-defined code STCS (Education Cess - ST) from UDC table 75I/GT to indicate the tax type.

Item Type

Services

Specify the value that describes the item type for services.

Raw Material

Specify the value that describes the item type for raw material.

Capital Goods

Specify the value that describes the item type for capital goods.

Personal Ledger Account

Specify the value that describes the item type for personal ledger account.

Click to jump to top of pageClick to jump to parent topicOffsetting Cenvat Credit for Excise and Services Against Excise Tax

Access the Credit Distribution - Excise form.

Date From

Enter the beginning date in the date range for which you want to display invoices.

Payment Date

Enter the date on which the payments are made to the tax authority.

Raw Materials, Capital Goods, PLA

These fields appear under Credit Utilised heading for various tax types.

Basic Excise Duty, Education Cess, Special Excise Duty, Additional Excise Duty, Higher Education Cess

Enter the credit utilized for the appropriate tax.

Service Tax

These fields appear under Credit Utilised heading on the Service Tax tab.

Service Tax Education Cess

Enter the credit utilized for the appropriate tax.

CVD

These fields appear under Credit Utilised heading on the CVD tab.

Counter Veiling Duty - RM, Education Cess - RM, Counter Veiling Duty - CG, Education Cess - CG

Enter the credit utilized for the appropriate tax.

Click to jump to parent topicOffsetting Cenvat Credit Against Service Tax

This section provides an overview of how to offset Cenvat credit against service tax, lists prerequisites, and discusses how to:

Click to jump to top of pageClick to jump to parent topicUnderstanding Cenvat Credit Offset Against Service Tax

You use the Credit Distribution - Services program (P75I013) to offset Cenvat credit for excise and services. You also use this program to issue payments to the tax authority for any service tax liabilities after offsetting the liabilities against Cenvat credit from excise and services. You must pay the services from the Cenvat accounts for services, raw materials, and capital goods in accordance with the percentage defined in the Credit Distribution Percentage application and then create an AP voucher in a specified order.

The service-to-excise transactions update the F75I013 table. After you issue payments for excise or services, the system displays the voucher number generated when issuing payments to the tax authorities.

Click to jump to top of pageClick to jump to parent topicPrerequisites

Before you perform the tasks in this section, you must:

  1. Set up the relationship between an operating unit and a business unit or cost center.

  2. Update the debit amount with AR information and the credit amount with the AP information at the recovery moment for the services in the F75I750 table.

  3. Complete the O2C and P2P cycles for the excise and service taxes.

  4. Set up the credit distribution percentage.

Click to jump to top of pageClick to jump to parent topicForms Used to Offset Cenvat Credit Against Service Tax

Form Name

FormID

Navigation

Usage

Service Payments

W75I013G

Excise periodic Processing (G75IEXC2H), Credit Distribution - Services

Offset Cenvat credit for excise and services against service tax.

Offset credits from different accounts and updates the F75I750 table and the Excise - MODVAT/PLA Summary File table (F75I310Y).

Update the cross-transactional settlement details in the F75I013 table.

Click to jump to top of pageClick to jump to parent topicSetting Processing Options for Credit Distribution - Services (P75I013)

Processing options enable you to specify the default processing for programs and reports.

Defaults

Operating Unit

Specify the operating unit of services.

Year

Specify the year for which you want to make the payments.

Calender Month

Specify the number of the month for which you want to run the report. For example, enter 01 for January.

Excise Unit

Specify the address book number of the excise unit.

Address Number-Excise Tax Authority

Specify the address book number for the tax authority of the excise unit.

From Tax Type

Basic Excise Duty

Specify the user-defined code BED (Basic Excise Duty) from UDC table 75I/GT to indicate the tax type.

Education Cess- Basic Excise Duty

Specify the user-defined code Cess (Education Cess) from UDC table 75I/GT to indicate the tax type.

Special Excise Duty

Specify the user-defined code SED (Special Excise Duty) from UDC table 75I/GT to indicate the tax type.

Additional Excise Duty

Specify the user-defined code AED (Additional Excise Duty) from UDC table 75I/GT to indicate the tax type.

Counter Veiling Duty

Specify the user-defined code CVD (Counter Veiling Duty) from UDC table 75I/GT to indicate the tax type.

Education Cess-Counter Veiling Duty

Specify the user-defined code CVDCS (Education Cess - CVD) from UDC table 75I/GT to indicate the tax type.

Service Tax

Specify the user-defined code ST (Service Tax) from UDC table 75I/GT to indicate the tax type.

Education Cess-Service Tax

Specify the user-defined code STCS (Education Cess - ST) from UDC table 75I/GT to indicate the tax type.

Item Type

Raw Material

Specify the accounts from which the credits can utilized for the purpose of offsetting on raw materials.

Capital Goods

Specify the accounts from which the credits can utilized for the purpose of offsetting on capital goods

Services

Specify the accounts from which the credits can utilized for the purpose of offsetting on services.

Click to jump to top of pageClick to jump to parent topicOffsetting Cenvat Credit for Excise and Services Against Service Tax

Access the Service Payments form.

Assign to

Tax Type

Enter a user-defined code from UDC table 75I/GT that identifies the tax type. Values are:

AED: Additional Excise Duty

BED: Basic Excise Duty

Cess: Education Cess

CVD: Counter Veiling Duty

CVDCS: Education Cess - CVD

FT: Freight for JST adj

INTR: INTR:Interest - TDS

OTHROther - TDS

PF: Packaging & Forwarding

SED: Special Excise Duty

ST: Service Tax

STCS: Education Cess - ST

SURSurcharge

TCS: Tax Collected at Source

TDS: Tax Deducted at Source

TOT: Turn Over Tax

VAT: Value Added Tax

Service Category Code

Enter a user-defined code from UDC table 41/01 that indicates the service category classification. Examples are:

01: Telephone

02: Cleaning

03: Transport

Services

These fields appear under Credit Utilised heading for Services tab.

Service Tax and Education Cess

Enter the credit utilized for the appropriate tax type.