CBEC Allows Education Cess Credit to be used for
payment of Service Tax
Education Cess exempted on excise duty: Consequent to the
increase in excise duty to 12.5% from 12% with effect from 1.3.2015, the
Government by Notification Nos. 14/2015-CE and 15/2015-CE dated 1.3.2015
exempted ‘education cess' and ‘Secondary and Higher Education Cess' on all
excisable goods. So, from 1.3.2015, no education cess was payable on excise
duty.
The Law - Credit of Education Cess can be
used only for payment of education cess: As per Rule (3)(7)(b) of the CENVAT
Credit Rules, the CENVAT Credit of education cess can be used only for payment
of education cess - that is this
credit cannot be used for payment of excise
duty or Service Tax.
But
from 1.3.2015, there was no education cess on excise duty. Then what to do
with the credit of education cess? The Government rectified this anomaly by
Notification No. 12/2015-CENT dated 30.4.2015, after keeping the assessees
under utter confusion for two months. By this notification, the CENVAT Credit
Rules were amended to allow utilisation of CENVAT credit of education cess:
1.
Paid on inputs or capital goods received in the factory of manufacture of
final product on or after the 1st day of March, 2015.
2.
of balance fifty per cent. Education Cess and Secondary and Higher Education
Cess paid on capital goods received in the factory of manufacture of final
product in the financial year 2014-15, and
3.
paid on input services received by the manufacturer of final product on or
after the 1st day of March, 2015,
for
payment of excise duty.
Education Cess exempted on Service Tax: Consequent to the
increase in Service Tax to 14% from 12% with effect from 1.6.2015, ‘education
cess' and ‘Secondary and Higher Education Cess' was done away with effect
from 1.6.2015.
The
same problem as relating to excise duty arose now for Service Tax, but the
Government allowed the assessees to wallow in confusion for five months
without granting the same benefits as in the case of excise.
Now
they have woken up and amended the CENVAT Credit Rules again to allow
utilisation of CENVAT credit of education cess:
1. on inputs or capital goods received in the
premises of the provider of output service on or after the 1st day of June,
2015
2. Balance fifty per cent. Education Cess and
Secondary and Higher Education Cess paid on capital goods received in the
premises of the provider of output service in the financial year 2014-15, and
3. on input service in respect of which the invoice,
bill, challan or Service Tax Certificate for Transportation of Goods by Rail
(referred to in rule 9), as the case may be, is received by the provider of
output service on or after the 1st day of June, 2015
for payment of service tax on any output service.
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