what is cenvat credit expain it
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Answer Posted / ramkumar nair
Before I am going to explain what is cenvat, you have to
under stand the Indian tax Central Excise Duty (BED). It
is called as basic excise duty. Every manufacturer is
liable to pay the excise duty in various kinds namely Basic
Excise Duty, Special Excise Duty, Additional Excise Duty
etc.,
Just think over a product which is reached to a end user,
how many manufacturing activities are done. So to reduce
the tax burden of the end user, the Govt. of India
introduce the MODVAT scheme which is now called CENVAT
scheme.
Based on this, if any manufacturer purchased a material,
which is duty paid, and if it is used for his further
manufacturing activity, he can avail this as credit in his
book based on the Central Excise Invoice. At the time of
selling his manufactured goods, he is liable to pay the
excise duty. He can adjust the credit which he has taken
into his book and pay the rest. For example:
CENVAT availed at the time purchased various goods
Rs.20,000 (Excise duty alone)
CENVAT payable for his product at the time sales
Rs.25,000
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