Credit of Cess can be used for payment of Excise Duty
Taking a step towards GST, in Union Budget 2015, Honourable Finance Minister has proposed to abolish Education Cess and Secondary and Higher Education Cess (collectively referred as ‘cess’); in case of Excise Duty w.e.f. 1st March, 2015 and in case of Service Tax w.e.f. a date to be notified after the enactment of Finance Bill, 2015.
This amendment has raised questions regarding fate of cess, majorly, in following cases:
- Closing balance of cess as on 28th February, 2015;
- Cess in respect of inputs and capital goods received in factory in F.Y. 2014-15 but CENVAT Credit is omitted to be availed;
- Cess in respect of input services received in F.Y. 2014-15 but CENVAT Credit is omitted to be availed;
- Deferred cess of Capital Goods received in factory in F.Y. 2014-15;
- Cess in respect of Capital Goods received in factory prior to F.Y. 2014-15;
- Cess in respect of inputs and capital goods received on or after 1st March, 2015; and
- Cess in respect of input services availed on or after 1st March, 2015.
To remove difficulties, Central Government has issued Notification No. 12/2015-CE (NT) dated 30th April, 2015 to provide provisions for utilisation of CENVAT Credit of cess for the purpose of payment of Excise Duty in following cases:
- Cess paid on inputs or capital goods received in factory on or after 1st March, 2015;
- Deferred cess in respect of capital goods received in F.Y. 2014-15;
- Cess on input services received on or after 1st March, 2015
Therefore, though Central Government has allowed to utilise CENVAT Credit of cess in three cases mentioned in para supra; fate of cess in respect of point no. a, b, c, and e is still full of doubts.
Here, it is pertinent to mention that similar doubts will also arise for Service Providers at the time of applicability of new Service Tax rate. Hope to see similar amendment in CENVAT Credit Rules, 2004 parallel with introduction of new rate of Service Tax to remove scope of difficulty as faced by manufacturers.
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