What is Cenavat Credit on input Services in Service Tax? How to claim Cenavat Credit in Service Tax Return?



Cenavat Credit is a very useful facility for those use input services. Those who take input services has the facility to claim Cenavat Credit. Service Tax liability is huge amount and so system of claiming Cenavat Credit on Inputs and input services is developed. Organised businesses can pass through technicalities of Cenavat Credit Rules and can claim Cenavat Credit. For this purpose there is no need to examine various inputs examine as to which input or input service is going into taxable service, which one into exempted service and which one are common to taxable and exempted services. Through this analysis it shall be possible to take Cenavat credit properly without attracting additional liability under Rule 6 of Cenavat Credit Rules.


 Cenavat credit can be claimed while filing Service tax return. Proper claim of Cenavat Credit reduces cash outgo on payment of service Tax and at the same time reduces the cost of inputs/input services leading cash payment of taxes on value addition only. If Cenavat credit is not properly taken, it will result in addition of tax element in the cost of input/output services and higher cash outflow on payment of service tax.




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