Central Value Added Tax (CENVAT)

About Central Value Added Tax (CENVAT)

• It is a tax credit system allowing manufacturers or service providers to claim a set-off on excise duty or service tax paid on inputs or input services used for manufacturing or providing output services.
• During the course of the manufacture of final products, the raw materials travel through various stages of production, wherein a duty is levied on every value-added at each stage.
• CENVAT eliminates this double taxation, simplifying the taxation process for both manufacturers and consumers.
• CENVAT Credit refers to the credit/set-off available to manufacturers when they use certain inputs to complete their product.
• A manufacturer can claim CENVAT credit on the following cases:
  • Excise duty on a final product: For manufacturers and producers of final products.
  • Service tax on output services: For providers of taxable and exempted services.
  • Inputs and capital goods: If these goods are being partially processed.

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