GST India Solution

Ask a Query

Client Login

Welcome GST India Solution

Circular No. 907/27/2009-CX

F.No.267/141/2009-CX8

Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)

New Delhi, dated the 7^th December, 2009.

To,

All Chief Commissioners of Central Excise (including LTU),

All Commissioners of Central Excise (including LTU),

All Director Generals.

Sir/ Madam,

Subject: Clarification on issues related to reversal of cenvat credit on WIP/ finished goods written off in the books of accounts -reg.

References have been received from field formations stating that as per Rule 3(5B) of CENVAT Credit Rules, 2004, if the value of inputs is fully written off, then the manufacture is required to pay an amount equal to cenvat credit taken. However, there is no provision to demand reversal of credit taken on inputs which have gone into manufacture of work in progress (WIP), semi finished goods and finished goods which have also been written off fully in the books of accounts.

2. The matter has been examined. Rule 3(5B) of the CENVAT Credit Rules, 2004, provides that if the value of any input on which cenvat credit has been taken is written off fully in the books of accounts, then the manufacturer is required to reverse the credit taken on the said input. As far as finished goods in concerned, it is stated that excise duty is chargeable on the activity of manufacture or production. Even though liability for payment of tax has been postponed to the time of removal of goods for the factory, but still the legal liability to pay the excise duty has been fastened on the goods, when it has been manufactured or produced. Therefore, normally all goods manufactured suffer excise duty at the time of removal, but if the manufactured goods are destroyed due to natural causes etc., Rule 21 of Central Excise Rules, 2002, provides for remission of duty. Further, Rule 3(5C) of CENVAT Credit Rules, 2004, also requires reversal of credit on the inputs when the duty is ordered to be remitted under the said Rule 21. Therefore, if the goods have been manufactured, in that case, a manufacturer is liable to pay excise duty unless duty is remitted under Rule 21. Therefore, if the value of finished goods is written off, the manufacturer would be liable to pay excise duty or he would be required to reverse the credit on the inputs used, if duty has been remitted on finished goods.

3. As regard writing off work in progress (WIP), it is stated that if the WIP has reached the stage, when it can be considered as manufactured goods, in that case, the same treatment as applicable to finished goods, discussed in para2 above would apply. However, if the activity carried out on the WIP goods cannot be considered as amounting to manufacture, in that case, the said goods should be considered as input and the treatment for reversal of credit applicable to input would be applicable.

4. Trade & Industry as well as field formations may be suitably informed.

5. Receipt of this circular may kindly be acknowledged.

6. Hindi version will follow.

Yours faithfully,

(Amish Kumar Gupta)

OSD (CX-8

GST RATES FINDER GST ACTS BOOK (DECODING GST) GST RULES GST PROVISIONAL REGISTRATION MODEL GST LAW LEVY OF TAX

Latest Articles

<--

WHAT IS GST?

GST i.e.Goods and Service Tax is a unified tax that replaces several indirect taxesleviedby the Central Government and the State Government(s)....

-->

BASIS OF CHARGE OF GST- SUPPLY

In pre-GST regime, goodswere liable to: (i) Excise Duty- on manufacture of goods; (ii) VAT/CST- on sale of goods; (iii) Entry tax- on ...

WHO IS LIABLE TO PAY TAX

GST is levied on every taxable person. Taxable person means a person who carries on any business at any place in India. Such . ..

WHAT IS TAXED UNDER GST

GST is a unified tax which is levied on: (i) goods; (ii) services and (iii) a mix of goods and/or services. Any supply of goods or services . .. ...

Who We Are

GST India Solution is an effort of firm of professionals who welcome implementation of GST. This is an interactiveplatformthat aspires to disseminate right knowledge to professionals, practitioners and public at large. This platform has beenfloatedbya firm of Chartered Accountants relentlessly working in field of direct and indirect taxes since early 1985.

Goods & Service Tax

Our core competence is statutory compliance, advisory, corporate tax planning and appellate matters of direct and indirect taxesandcorporate training sessions on GST.

The senior partner of the firm has to his credit several professional publications viz., Delhi Sales Tax Right to Use Goods Act, Delhi VAT, Maharashtra VAT, West Bengal VAT, Haryana VAT published by Taxmann. Madhya Pradesh VAT and Chhattisgarh VAT were published by Suvidha Law House, Bhopal. He has also addressed seminars on indirect taxes organized by professional bodies like ICAI, IMA, NIFM etc. and has also contributed articles on subjects of pro. . . . .