Cenvat

[Former Member]

Hi Guys,

Can anyone pls explaing what is cenvat and how it is calcualted? I also came across the term cenvat utilisation.

What do we mean by it.

Thanks

Srikanth

[Former Member]

CENVAT stands for Central Value Added Tax (earlier, they used the term MODVAT - modified Value Added Tax). Under CENVAT Credit Rules 2004, you will be able to take credit of excise duty, service tax, additional customs duty paid on input goods/services and utilize the credit for payment of excise duty, service tax on your output (goods/services), provided you are manufacturer/producer of final products or a provider of taxable service.

[Former Member]

Hi Srikanth,

As srikanth told Cenvat (Central Value added Tax). Basically it is to take the credit of the excise duty amount that has been paid for the purchase of goods. I will detail u with an example

Suppose say u purchase goods for Rs.1000/- on that your vendor will show excise duty as say 160/- and the total amount u have to pay to the vendor. Now as u use this material for your further production of goods what u will do is u will take the credit of this excise duty u had already paid. Now lets suppose u had produced a final good of say 10000/- now on this ur excise dut comes to 1200/-. Now u need not be required to pay this 1200/- to tax authorities u can pay only (1200-160 = 1040) as the 160/- amount is already paid to the vendor.

I hope u understood.

regards

srikanth.