Accounting CENVAT Credit Adjustments

As per CENVAT Credit rules, credit available on Inputs/Capital goods (CENVAT Credit) can be adjusted towards the Service Tax Liability. Similarly the Service Input Credit can be adjusted towards Duty Payable.

Example: On 31-10-2012 ABC Company has a CENVAT Credit

Basic Excise Duty - Rs. 24,000

Education Cess - Rs. 480

Secondary Education Cess - Rs. 240 on purchase of 2,00,000 Pet Bottles (Input) @ Re. 1 per bottle from Mega Manufacturers dated 16-10-2012.

CENVAT Credit is adjusted towards Service Tax bill Sale/3-1

If you are using Excise Module of Tally.ERP 9, follow the below mentioned procedure to record the Purchase Voucher to account Excise Duty and later adjust CENVAT Credit towards Service Tax.

1. Record the transaction in Excise Purchase Voucher

Ensure Excise Manufacturer feature is enabled, CENVAT Ledgers, Stock Item, Tariff Classification and Voucher Types are created. For more details on Excise for Manufacturer please refer - Excise For Manufacturer module.

To record Excise Purchases

Go to Gateway of Tally > Accounting Vouchers > F9: Purchase

Record the Excise Purchase as shown below:

Note: CENVAT Credit on the above transaction is availed while booking the purchases by selecting CENVAT Ledgers.

2. Create Voucher Class in Journal Voucher

Go to Gateway of Tally > Accounts Info. > Voucher Types > Alter > In Select Item screen select Journal

In Voucher Type Alteration screen

• Tab down to Name of Class field and enter the Class Name as CENVAT Adjustment

• In Voucher Type Class screen

• Set the option Use Class for Excise /CENVAT Adjustments to Yes

• Press Enter to save Voucher Type Class screen and Voucher Type Alteration screen

3. Record the transaction in Journal Voucher (to adjust CENVAT Credit)

To record CENVAT Credit Adjustment entry

Go to Gateway of Tally > Accounting Vouchers > F7: Journal

1. In Change Voucher Type screen select CENVAT Adjustment in Class field

2. Press F2 and change the date to 31-07-2012

3. In Used for field select CENVAT Adjustment from the list of Excise Adjustments

4. In Excise Unit field select ABC Company

5. In Debit field select Service Tax @ 12% Ledger

6. In Service Tax Details screen

7. In Type of Ref field select Agst Ref

8. In Name field select Sale/3-1 from Pending Tax Bills

9. On selecting the bill the Service Category and tax amount will be defaulted. Enter Rs.24,000 in Amount field

7. In Debit field select Education Cess @ 2% Ledger

8. In Service Tax Details screen

9. In Type of Ref field select Agst Ref

10. In Name field select Sale/3-1 from Pending Tax Bills

11. On selecting the bill the Service Category and tax amount will be defaulted. Enter Rs. 480 in Amount field

9. In Debit field select Secondary Education Cess @ 1% Ledger

10. In Service Tax Details screen

11. In Type of Ref field select Agst Ref

12. In Name field select Sale/3-1 from Pending Tax Bills

13. On selecting the bill the Service Category and tax amount will be defaulted. Enter Rs. 240 in Amount field

11. In Credit field select Basic Excise Duty (CENVAT) Ledger

12. In Excise Duty Allocation screen

13. In Type of Ref select Agst Ref

14. In Name field select 1/1-2012

15. Based on the bill selected, Amount will be defaulted (here, Rs.24,000)

13. In Credit field select Education Cess (CENVAT) Ledger

14. In Excise Duty Allocation screen

15. In Type of Ref select Agst Ref

16. In Name field select 1/1-2012

17. Based on the bill selected Amount - Rs. 480 will be defaulted

15. In Credit field select Secondary Education Cess (CENVAT) Ledger

16. In Excise Duty Allocation screen

17. In Type of Ref select Agst Ref

18. In Name field select 1/1-2012

19. Based on the bill selected Amount - Rs. 240 will be defaulted

17. Set the option Provide Details to Yes to provide Adjustment Details for Excise.

The completed CENVAT Adjustment Voucher is displayed as shown:

18. Press Enter to Accept and save the Voucher