CA
Pradeep Jain
CA Neetu Sukhwani
Introduction:- The announcement of the exemption to the levy of
Education Cess and SHE Cess levied on Excise duty with effect from 01.03.2015
and that levied on service tax with effect from 01.06.2015 created new hopes in
the minds of the assessees as regards ‘Ease of doing business’ with reduction
in the compliance procedure for maintaining separate accounting records for
Education Cess and SHE Cess. However, the assessees forgot that everything
comes for a cost. The hapeless assessees did not realise that the exemption
brought the inbuilt cost in the form of unutilised balance of Education Cess
and SHE Cess for which there was no amendment or clarification. This article is
an attempt to highlight the probable difficulties faced by the assessees on
account of no clarification as regards utilisation of the balance of Education
Cess and SHE Cess available as on 01.03.2015 and 01.06.2015.
Backdrop of recent amendments made by government:- Inspite of the much hype created as regards the fate of
the balance of Education Cess & SHE Cess available with the assessees, the
government has not responded in the correct perspective. The summarized version
of the two notifications issued by the government is presented as follows:-
NOTIFICATION NO. 12/2015-C.E. (N.T.)
DATED 30.04.2015
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NOTIFICATION NO. 22/2015-C.E. (N.T.)
DATED 29.10.2015
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1.
Cenvat Credit Rules amended with effect from 30.04.2015.
2.
Education Cess & SHE Cess on inputs or capital goods received in the
factory of manufacturer of final product on or after 01.03.2015 can be
utilised for payment of excise duty.
3.
Balance 50% credit of Education Cess & SHE Cess paid on capital goods
received in the factory of manufacturer of final product in financial year
2014-15 can be utilised for payment of excise duty.
4.
Education Cess & SHE Cess on input services received by the manufacturer
of final product on or after 01.03.2015 can be utilised for payment of excise
duty.
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1.
Cenvat Credit Rules amended with effect from 29.10.2015.
2.
Education Cess & SHE Cess on inputs or capital goods received in the
premises of the provider of output service on or after 01.06.2015 can be
utilised for payment of service tax on any output service.
3.
Balance 50% credit of Education Cess & SHE Cess paid on capital goods
received in the premises of the provider of output service in financial year
2014-15 can be utilised for payment of service tax on any output service.
4.
The credit of Education Cess and Secondary and Higher Education Cess paid on
input service in respect of which the invoice, bill, challan or Service Tax
Certificate for Transportation of Goods by Rail (referred to in rule 9), as
the case may be, is received by the provider of output service on or after
the 1st day of June, 2015 can be utilized for payment of service tax on any
output service.
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In-depth analysis of the scenario:- The assessees were waiting for the confirmation from the
side of the government as regards utilisation of balance of Education Cess and
SHE Cess as on 01.03.2015 and 01.06.2015 but on the contrary, the amendments
were made for permitting utilisation of Education Cess & SHE cess on
‘Transit goods and services’. Anyways, following points are worth noting:-
The
government took around 5 months to amend Cenvat Credit Rules so as to enable
service providers to utilise the education cess and SHE cess levied on transit
goods and services whose invoices were issued after 01.06.2015. Furthermore, in
author’s opinion, as exemption was granted to levy of education cess and SHE
cess with effect from 01.03.2015, it is a very remote possibility that service
provider would receive inputs/capital goods with education cess and SHE cess on
or after 01.06.2015. But, as it is in favour of the assessee, we may appreciate
the government’s action.
The
delay in making the amendment vide notification
no. 22/2015-CE (NT) dated 29.10.2015 has
also lead to inability to utilise the cenvat credit of education cess and SHE
cess of inputs/capital goods/invoices of input services received on or after
01.06.2015 in the months of June, July, August and September, 2015 itself
because the amendment is prospectively applicable with effect from 29.10.2015
whereas the last date of filing service tax return for the half year ending
30.09.2015 was 25.10.2015. Furthermore, even assessees revising returns are
unable to utilise the said credit and reflect it in their service tax returns.
The government should have released this amendment timely. Furthermore, there
must have been certain assessees who have already availed and utilised cenvat
credit of education cess and SHE cess on invoices received after 01.06.2015 on
the presumption that similar amendment was made for manufacturers also and they
might be probably receiving show cause notice for the same soon.
The
government’s silence on utilisation of Education Cess and SHE Cess balance will
also lead to complications in computing the quantum of cenvat credit wrongly
availed under amended Rule 14 of the Cenvat Credit Rules, 2004. This is for the
reason that Rule 14 presupposes that the opening balance of the month has been
utilised first, thereafter the credit taken during the month is utilised next.
However, as per above amendments, the balance of education cess and SHE cess as
on 01.03.2015 and 01.06.2015 are intact while the education cess and SHE cess
on inputs/capital goods/input services whose invoices are received after
01.06.2015 are in reality utilised first than the prevalent balance. If there
is a case of wrong availment of cenvat credit after 01.03.2015, the
calculations under Rule 14 will definitely be complicated.
Apart
from this, there is no restriction under the Cenvat Credit Rules, 2004 that the
balance 50% cenvat credit of capital goods is to be availed in the next year
itself. However, express provisions as regards utilisation of balance cenvat
credit of capital goods are being made for capital goods received in the
financial year 2014-15 only.
It
may also be noted that while manufacturers were permitted to utilise the
education cess and SHE cess on input services received by them on or after
01.03.2015 against payment of excise duty, the service providers were continued
to follow the restriction of utilising cenvat credit of education cess and SHE
cess towards payment of Education cess and SHE cess only. This definitely
placed service providers under a disadvantageous position and they should also
have been permitted to utilise the education cess and SHE cess against payment
of service tax on or after 01.03.2015.
Winding up:- The government is not clarifying what the assessees want
and rather is making situations more complicated. When the government can
permit utilisation of Education Cess and SHE Cess on transit goods received on
or after 01.03.2015 by manufacturer and transit goods received on or after
01.06.2015 by service providers and services for which invoices are received
after 01.06.2015, that too towards payment of excise duty and service tax, then
there is no loss in permitting utilisation of the balance of education cess and
SHE cess available with assessees as on 01.03.2015 and 01.06.2015. Well, all
assessees are waiting a simple YES for utilising the balance of Education Cess
and SHE Cess available with them as on 01.03.2015 and 01.06.2015.
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