2018 (5) TMI 458 – AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – 2018 (12) G. S. T. L. 526 (A. A. R. – GST) – Whether accumulated credit by way of Krishi Kalyan Cess (KKC) as appeared in the Service tax return of Input Service Distributor (ISD) ON June 30, 2017 which is carried forward in the electronic credit ledger maintained by the company under CGST Act 2017, will be considered as admissible input tax-credit?
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Held that: – The enumerated list of items in respect of which CENVAT credit is available makes no reference to the KKC. By the Notification No. 28/ 2016 – Central Excise (N.T.), the 26th May, 2016, the Central Government made the rules, which came into force on 1st of June, 2016, to amend the CENVAT Credit Rules, 2004 – in respect of these rules, CENVAT credit was available in respect of KKC.
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KKC would be utilised towards payment of KKC only, Further, it was expressly provided that the list of items in respect of which CENVAT credit is available, as enumerated abov
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ction 98 Of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by KANSAI NEROLAC PAINTS LIMITED, the applicant, seeking an advance ruling in respect of the following question : Whether accumulated credit by way of Krishi Cess (KKC) as appeared in the Service tax return of Input Service Distributor (ISD) ON June 30, 2017 which is carried forward in the electronic credit ledger maintained by the company under CGST Act 2017, (Pill be considered ns admissible input tax-credit? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions, Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would
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ble CENVAT credit to its factories and Head Office according to Rule 2(m) of Cenvat Credit Rules 2004 (herein after referred as CCR), read with Rule 7 and Rule 7A of CCR. Rule 9(10) of the CCR requires the input service distributor to file the half yearly return in the statement giving the detail of the credit received and distributed during the said half yearly period by the end of the following months. As an input service distributor, the company received CENVAT credit at head office. Those CENVAT credit also included Krishi Kalyan Cess (KKC) as well but the company could not distribute KKC to its factories as because, KKC credit could be utilized only with KKC liability as prescribed under CCR, and recipient entities being manufacturing units did not have any KKC liability to set off KKC credit. As a result of which there was accumulation of KKC credit in the return service tax ISD return, filed under Rule 9(10) or CCR. In view of provision of sec 140(1) of CGST Act 2017 read with R
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te of Maharashtra. Apart from centralized registration, company also obtained registration as Input Service Distributor (ISD) for its HO to distribute eligible credit to its respective manufacturing units according to Rule 2(m) of Cenvat Credit Rules 2004 (herein after referred as CCR), read with Rule 7 and Rule 7A of CCR. 1.3 CBEC had vide Circular No. 97 dated 23.8.2007 clarified that input service distributor is an office or premises of the manufacturer or taxable service provider which receives bills/invoices etc., of input services. The input service distributor can distribute the eligible credit to any unit of the manufacturer or any premises/office of taxable service provider. 1.4 Rule 9(10) of the CCR requires the input service distributor to file the half yearly return in the statement giving the detail of the credit received and distributed during the said half yearly period by the end of the following months. 1.5 As an input service distributor, company received cenvat credi
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t 2016 1.2 Sec 161(5) of the Finance Act specified that for levy and collection of KKC, Chapter V of Finance Act 1994 (Service Tax) will be applicable. 1.3 Entry 92C of Union List I of Indian Constitution empowers legislature to levy service tax as provided under Chapter V of Finance Act 1994. 1.4 122nd amendment of Constitution deletes Entry 92C of Union List I, in view of implementation Of Goods and Service Tax. 1.5 It implies KKC is also subsumed in Goods and Service Tax along with service tax. In other words CGST liability under CGST Act 2017 contains liability on account of KKC as well. 1.6 Rule 3(1a) of CCR includes KKC as cenvat credit. 1.7 Sec 140(1) allows a registered person to carry forward the CENVAT credit in return to electronic credit ledger provided the said credit is admissible under CGST Act 2017. 1.8 As discussed in para 1.5 above, CGST liability represent KKC liability as well therefore KKC credit will also be considered as admissible CENVAT credit as per proviso (1
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have any KKC liability to set off KKC credit, resulting in accumulation of KKC credit. In Post GST regime neither there is any specific restriction in law regarding admissibility of KKC nor there any specific provision in law regarding admissibility of KKC as input tax credit. In view of the aforesaid facts, our question regarding admissibility of input tax credit is duly covered under clause (d) of section (2) of section 97 of CGST,/MGST Act 2017 and thus the said question is duly covered under the provision of Advance Ruling as provided under CGST/MGST Act 2017. Submission of NIL date 2. Legislative provisions. 2.1 Sec 161 of Finance Act 2016 read with Chapter VI of Finance Act 2016: 161. (1) This Chapter shall come into force on the 1st day of June, 2016 (2) There shall be levied and collected in accordance with the provisions of this Chapter a cess to be called the Krishi Kalyan Cess as Service tax on all or any of the taxable services at the rate of 0.5 per cent. on the value of s
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vices, as they apply in relation to the levy and collection of tax on such taxable services under the said Chapter or the rules made thereunder, as the case may be. (Emphasis supplied) 2.2 Deletion of entry 92C vide constitution 122nd amendment 17. In the Seventh Schedule to the Constitution. (a) an List I Union List, (i) for entry 84, the following entry shall be substituted namely: 84. Duties of excise on the following goods manufactured or produced in India namely:- (a) petroleum crude: (b) high speed diesel: (c) motor spirit (commonly known as petrol) (d) natural gas (e) aviation turbine fuel; and (f) tobacco and tobacco products . (ii) entries 92 and 92C shall be omitted; (Emphasis supplied) 2.3 CGST Rules 2017 117. Tax or duty credit carried forward under existing law or on goods held in stock on appointed day.- (1) Every registered person entitled to take credit of input under section 140 Shall, within ninety days of the appointed day submit a declaration electronically in FORM
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he CENVAT Credit Rules, 2004, in rule 3, (a) after sub-rule (1), the following sub-rule shall be inserted, namely :- (1a) A provider of output service shall be allowed to take CENVAT credit of the Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016 (28 of 2016); ; (b) in sub-rule (4), after the ninth proviso, the following proviso shall be inserted, namely,- Provided also that the Cenvat credit of any duty specified in sub-rule (1) shall not be utilised for payment of Krishi Kalyan Cess leviable under section 161 of the Finance Act, 2016 (28 of 2016); ; (c) in sub-rule (7), (i) after the words, figures and brackets sub-rule (1) , the words, figures and brackets , sub-rule (1a) shall be inserted; (ii) after clause (c), the following clause shall be inserted, namely,- (d) Cenvat credit in respect of Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016 (28 of 2016) shall be utilised only towards payment of Krishi
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Tax along with service tax. In other words CGST liability as accrued under CGST Act, 2017 contains liability on account or KKC as well.. 4.5 Rule 3(1a) of CCR includes KKC as cenvat credit. 4.6 CCR provides KKC liability could be set off with KKC credit only CGST liability subsumed KKC liability in of 122nd amendment of constitution. Therefore migrated KKC credit will be admissible to setoff with CGST liability. 4.6 Sec 140(1) allows a registered person to carry forward the CENVAT credit in return to electronic credit ledger provided the said credit is admissible under CGST Act 201 7. 4.7 Sec 16 and 17 of CGST Act determines which credit will be admissible under CGST Act 2017. There is no restriction on admission of KKC as cenvat credit under the aforesaid provisions of the Act. Therefore KKC credit will also be considered as admissible CENVAT credit as per proviso (1) to sec 140(1) read with sec 16 and sec 17 of the CGST Act, 2017. Prayer: In view of the aforesaid facts of the case a
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e GST returns. Therefore, assesses were able to transfer the closing balance of credit in respect of Central Excise duty, Service Tax, Local VAT etc. As the opening credit balance in the GST returns. As specified in the proviso to Section 140(1) of the Act, the taxable person is allowed to carry forward the credit to the extent admissible as INPUT TAX CREDIT under GST. Definition of Input tax as given in section 2(62) does not include any cess. So apparently Krishi Kalyan Cess, will not be allowed to be carried forword. 04. HEARING The case was taken up for hearing on dt.06.02.2018 and on dt.21.02.2018 when Sh. Subhasis Banerjee, Chartered Accountant attended alongwith Sh. Sandesh Shinde, Executive Accounts (GST) and Sh. Mahesh T. Mandlik, Senior Accounts Officer appeared and reiterated the contention as made in the written submission. The jurisdictional Officer, D.C. GST, LTU 4, Mumbai was not present during both the hearings but has furnished a written submission in the matter. 05. O
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isting law in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely: (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. The GST Act does not have a definition of the words CENVAT credit . The words have also not been defined under the Excise and Service Tax laws. However, we find CENVAT credit rules, 2004 wherein the word credit is said to mean CENVAT credit as can be seen thus- Rule 3. CENVAT credit. – (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT cre
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Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v) (vi) and (via); (viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, Provided that a provider of taxable service shall not be eligible to take credit of such additional duty; (viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003); (ix) the service tax leviable under section 66 of the Finance Act', (x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004); and (xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and (xi) the additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005) The enumerated list of items in respect of which CENVAT credit is available makes no reference to the KKC. BV the N
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lause (c), the following clause was inserted – (d) Cenvat credit in respect or Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016 (28 of 2016) shall be utilised only towards payment of Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016 (28 of 2016) ; It can be seen that by express provision, it was made clear that KKC would be utilised towards payment of KKC only, Further, it was expressly provided that the list of items in respect of which CENVAT credit is available, as enumerated above, would not be utilized for payment of KKC. Thus, there was a clear demarcation of the credit in respect of KKC. Under GST, there is no levy of KKC. Now, we know that tax and duty and cess are distinct levies. In Cellular Operators Association of India vs. Union of India 2018 (2) TMI 1264 – DELHI HIGH COURT [Writ Petition (Civil) NO. 7837/ 2016 dt. 15.02.2018], the Hon. Delhi High Court was dealing with the Petition for dire
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een utilised for payment of excise duty service tax on the output, i.e, manufactured goods or taxable services Thus, cross utilization of EC and SHE towards excise duty or service tax was impermissible and not permitted. 4. EC and SHE were abolished and were not payable on excisable goods with effect from 1st March, 2015 vide Notification Nos. 14/2015-CE and 15/2015-CE both dated 1st March, 2015. EC and SHE were also abolished and ceased to be payable on taxable services when Section 95 of Finance Act (No, 2) 2004 and Section 140 of Finance Act, 2007 were omitted by Finance Act, 2015. The omission was to take effect from 1st June, 2015 vide Notification No, 14/2015-STdated 19th May, 2015. As a result, levy of EC and SHE on excisable goods was withdrawn with effect from 1st March, 2015 and in respect of taxable services with effect from 1st June, 2015. The petitioners do not have any grievance against the withdrawal or abolition of levy of and SHE. 5. The grievance of the petitioners is
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the excise duty or service tax. In fact, what the petitioners seek is an amendment of the scheme to allow them to take cross utilization of the unutilized EC and SHE upon the two cesses being Withdrawn against excise duty and service tax, though this was not the position even earlier, The Hon. Court dismissed the Writ Petition. In the present case, KKC is to be utilized for payment of KKC only. Therefore, KKC cannot be treated as excise duty or service tax. in view thereof, the CENVAT credit as referred to in sub-section (1) of section 140 would not include the credit in respect of KKC. We can also see the position in respect of the Swachh Bharat Cess (SBC) which was brought in force by Chapter VI (Section 119) of the Finance Act 2015. The Frequently Asked Questions (FAQ) issued by the Central Board of Excise and Customs (CBEC) in regard to SBC explained the new levy thus – Q. 1 What is Swachh Bharat cess (SBC)? Ans. It is a Cess which shall be levied and collected in accordance with
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h Bharat initiatives or for any other purpose relating thereto. The Swachh Bharat Cess leviable under sub-section (2) shall be in addition to any cess or service lax lev table on such taxable services under Chapter of the Finance Act, 1994, or under any other law for the time being in force. (4) The proceeds of the Swachh Bharat Cess levied under sub-section (2) shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf utilise such sums of money of the Swachh Bharat Cess for such purposes specified in sub-section (2), as it may consider necessary. (5) The provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services. as they apply in relation to the levy and collec
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ament by law in this behalf utilise such sums of money of the Krishi Kalyan Cess for such purposes specified in sub-section (2), as it may consider necessary. (5) The provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection Of the Krishi Kalyan Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under the said Chapter or the rules made thereunder, as the case be. As can be seen, both SBC and KKC are on the same lines. Therefore, the FAQs explaining SBC apply with equal force to KKC. Under the GST Act too, the FAQs issued by CBEC clarify thus – 112 Can ITC of Swach Bharat Cess or Krishi Kalyan Cess be carried forward under GST? No Thus, it can be seen that the non-availability of carry forward of credit with respect to KKC has been clarified t
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