CENVAT Credit Rules - Input Service Distributor - Rule 7 Amended
7. Manner of distribution of credit by input service distributor. - The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely:- (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; | |
Existing Rule | As Amended |
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(b) credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed; | (b) credit of service tax attributable to service used by one or more units exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed; |
(c) credit of service tax attributable to service used wholly in a unit shall be distributed only to that unit; and | (c) credit of service tax attributable to service used wholly by a unit shall be distributed only to that unit; and |
(d) credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units to which the service relates during the same period. | (d) credit of service tax attributable to service used by more than one unit shall be distributed pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all its units, which are operational in the current year, during the said relevant period. |
Explanation 1.- For the purposes of this rule, "unit" includes the premises of a provider of output service and the premises of a manufacturer including the factory, whether registered or otherwise. Explanation 2.- For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5. Explanation 3. - (a) The relevant period shall be the month previous to the month during which the CENVAT credit is distributed. (b) In case if any of its unit pays tax or duty on quarterly basis as provided in rule 6 of Service Tax Rules, 1994 or rule 8 of Central Excise Rules, 2002 then the relevant period shall be the quarter previous to the quarter during which the CENVAT credit is distributed. (c) In case of an assessee who does not have any total turnover in the said period, the input service distributor shall distribute any credit only after the end of such relevant period wherein the total turnover of its units is available. | Explanation 3.- For the purposes of this rule, the ‘relevant period' shall be,- (a) If the assessee has turnover in the ‘financial year' preceding to the year during which credit is to be distributed for month or quarter, as the case may be, the said financial year; or (b) If the assessee does not have turnover for some or all the units in the preceding financial year, the last quarter for which details of turnover of all the units are available, previous to the month or quarter for which credit is to be distributed. |
Incidentally, the CBEC had vide letter F. No. 354/246/2012-TRU dated December 17, 2013 informed that subsequent to the amendment done to rule 7 of CCR, 2004 with effect from 01.04.2012 and 01.07.2012, the trade had represented that procedural difficulties are being faced in distribution of input service credit by input service distributor (ISD) under rule 7 of the CCR, 2004 and that the same issue was raised in the forum for exchange of views between Industry Groups and Government chaired by the Adviser to Finance Minister.
The Board had, therefore, examined the issue and proposed to amend the rule to address the concerns of the trade. The proposed changes to the existing rule 7 of the CENVAT Credit Rules, 2004 were shown in Italic, bold with underlining or striking of the portion which is to be deleted.
We had covered this ‘proposal' in DDT 2254 18.12.2013.
Board wanted comments/views/suggestions before 27th December, 2013 and they hoped to finalise the issue by 31/12/2013. [See Shome Panel plays role in simplifying procedures and issuance of clarifications ]
That date came and went by nearly two months back.
And now the amending notification arrives on to the scene stealthily and without much of a fuss.
Hope the concerns of the trade have been mitigated at least now.
There is still a scope for change as the amendments would be effective from 1 st April, 2014.
Notification No. , Dated: February 24, 2014