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INPUT SERVICE DISTRIBUTOR CONCEPT SIMPLIFIED & SCOPE WIDENED

Budget - By: - Pradeep Jain - Dated:- 5-3-2016 - Introduction:- Budget 2016 has been introduced and it has bought some major changes in the Cenvat credit scheme by amending the Cenvat Credit rules, 2004. One such change has been introduced in the rule 7 which relates to the input service distributer. With a view to improve credit flows between different manufacturing / service locations, Rule 7 dealing with distribution of credit on input services by an Input Service Distributor is being complet .....

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to its manufacturing units or units providing output service, subject to the following conditions, namely:- ++ The credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; ++ 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; ++ Credit of service tax attributable to service used wholly by a unit shall be d .....

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gistered 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. - for the purpose of this rule, the relevant period shall be- 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 If the assessee does not have turnover for some or all the units in the preceding .....

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sable goods exported; (b) Export turnover of services determined in terms of clause (D) of sub-rule (1) above and the value of all other services, during the relevant period; and All inputs removed as such under sub-rule (5) of rule 3 against an invoice, during the period for which the claim is filed. This rule is applicable as on the date and will continue to be applicable till 31.3.2016. Amended rule 7 as applicable from 1.4.2016:- The new rule 7 as amended by the notification no. 13/2016-CE(N .....

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rule 9 does not exceed the amount of service tax paid thereon; (b) the credit of service tax attributable as input service to a particular unit shall be distributed only to that unit; (c) the credit of service tax attributable as input service to more than one unit but not to all the units shall be distributed only amongst such units to which the input service is attributable and such distribution shall be pro rata on the basis of the turnover of such units, during the relevant period, to the to .....

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hall maintain separate account for input service credit received from each of the input service distributors and shall use it only for payment of duty on goods manufactured for the input service distributor concerned; (f) credit of service tax paid on input services, available with the input service distributor, as on the 31st of March, 2016, shall not be transferred to any outsourced manufacturing unit and such credit shall be distributed amongst the units excluding the outsourced manufacturing .....

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y, whether registered or otherwise or the premises of an outsourced manufacturing unit. Explanation 2.-For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5: Provided that the turnover of an outsourced manufacturing unit shall be the turnover of goods manufactured by such outsourced manufacturing unit for the input service distributor. Explanation 3.- For the purposes of this rule, the relevant period shall be, - (a) if the assessee h .....

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unit means a job-worker who is liable to pay duty on the value determined under rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 on the goods manufactured for the input service distributor or a manufacturer who manufactures goods, for the input service distributor under a contract, bearing the brand name of such input service distributor and is liable to pay duty on the value determined under section 4A of the Excise Act. Analysis of amendment:- Th .....

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t of the said decision. The amendment is a forward step in extending the benefit to job-workers/manufacturer and ensuring the free flow of credits. The new rule also clarifies that the provisions of Rule 6 of the Cenvat Credit Rules, 2004 relating to reversal of credit in respect of inputs and input services used in manufacture of exempted goods or for provision of exempted services, shall not apply to the Input service distributor. Earlier, there prevailed doubts as to the inter-play between th .....

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