TIOL TUBE Discussed:

Budget 2016 introduced several assessee-friendly amendments in Rule 6 of the CCRs, 2004. However, there was one anomaly in the amended Rule. Not many observed this in fine print, but during Post-Budget Analysis, we raised this issue and pointed out that the Rule has not been properly drafted to reflect the intention of the Government.

Govt Response:

Now, the responsive Board has done the needful. An amendment has been made to sub-rule (3) of Rule 6. The amended Rule reads:

1. pay an amount equal to six per cent. of value of the exempted goods and seven per cent. of value of the exempted services subject to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period

As per this amended provision, assuming during a month, the value of exempted goods to be Rs one crore, the 6% amount would be Rs 6,00,000/-. However, if the opening balance of the credit of input and input Services plus the credit taken on all inputs and input Services during that month is Rs 1,20,000/- only, then the 6% amount would be restricted to Rs 1,20,000/- only.

All is fine, but even this new amendment has a problem. While Table No 6 of the ER1 return (CENVAT statement) has separate columns for fresh credit of inputs, input services and Capital goods, the opening balance of credit at the beginning of the Month does not have item-wise break up. This means, the opening balance of Credit includes capital goods credit and it is not possible to identify the opening balance of credit on inputs and input services available for the purpose of Rule 6(3).

Perhaps it is not easy to solve the problems created by this Rule which was born as Rule 57CC with several congenital defects. Even the surgery performed in 2016 budget seems to have side effects.