Q:- 1 What do you understand by cenvat? Explain its features? What are main advantages of ?
(IIIustrate how cascading effect is eliminated under CENVAT?
Ans. Definition of CENVAT
CENVAT is very important for business point of view . It means central excise duty only on value added by one manufacturer . When he send it from factory for sale or any other purpose . It is not tax on sale value .
Manufacture A à Manufacturer B à Manufacturer C
CENVAT =10% à RS. ( 100+10 ) Rs 330 +
+ 200 + 200x 10%
Features of CENVAT
Apply on all goods
CENVAT applies on all goods included input manufactured
It allows credit of duty
Manufactured by A = Rs. 100
+ CENVAT = RS. 10
Manufactured by B
110 + Valued add Rs.200 = 310
CENVAT 10 % 31
Produced and send to C = 341
NET CENVAT payable by B = Total duty - Credit of duty
= 31-10 = 21
Submit specific document for getting CENVAT Credit
Credit can be taken by manufacture on receipt of inputs
In case of capital goods 50% credit can be take @ purchase of capital goods balance in subsequent year.
No CENVAT Credit is allowed to final product or output service.
All items listed tariff schedule except high speed diesel oil and motor spirit (Petrol) are covered.
In case of wrong credit then it may recovered under section 11A, 11AA, 11AB credit and interest.
Advantage of CENVAT
- Cascading effect can be ended with the help of CENVAT. Because other manufacturer. And when other manufacturer gets goods he will not pay duty on input. So he can save his money for double tax on same product. If he pays excise duty on input he can get credit of this amount from central excise department.
- No CENVAT on high speed diesel oil and petrol
- No statutory record needed. Only normal record needed.
- It applies both normal and capital goods.
- No declaration is necessary for available credit in respect of input.