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We are manufacturers. As per Rule 2(a)(A)(i) of Cenvat Credit Rules, 2004, the definition of ‘capital goods’ includes all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, [heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act. Does it mean that we can take Credit of excise duty or CVD paid on packaged software such as Microsoft Office, MS Word, MS Excel, etc.? Will the position change if we are service providers?
The definition that you have quoted also says that capital goods means goods used in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office or used for providing output service. Software packages such as MS Word, MS Excel, etc. are used in offices or factories for enhancing productivity and not for manufacture of final products or for providing services. So, reading the definition of capital goods in its entirety, you cannot take Cenvat Credit of the duty paid on such packaged software utilities.
We can take Cenvat Credit of only 50 per cent of the duty paid on capital goods in the first year. Does a similar restriction apply to service tax also?
No. As per Rule 4(2) of Cenvat Credit Rules, 2004 the Cenvat Credit in respect of capital goods received in a factory or in the premises of the provider of output service or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory, or in the premises of the job worker, in case capital goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be, at any point of time in a given financial year shall be taken only for an amount not exceeding 50 per cent of the duty paid on such capital goods in the same financial year. A similar dispensation is not there for service tax.
As a private limited company, we want to take unsecured deposits/loans from our directors with maturities of more than six months. Please give us the gist of restrictions and necessary references.
You have to take a declaration from each director that the amount he is lending is not out of borrowed funds. The borrowings from directors, companies and financial institutions other than banks cannot exceed the sum total of paid-up capital and free reserves, except through a special resolution. You may refer to Section 180 (1) (c) of the Companies Act, 2013 and Companies (Acceptance of Deposit) Rules, 2014.
What are Safe Harbour Rules?
Safe Harbour Rules specify a set of norms, compliance with which is acceptable to the authorities as amounting to compliance with related laws. The idea is to focus on consequence rather than the precise language of the law. It helps reduce or eliminate liabilities and unnecessary litigations.
