The Pharmaceuticals Export Promotional Council of India (Pharmexcil) has urged the Union finance ministry for the inclusion of Loan Licence Location also in the definition of “Unit” in Rule 7 of Cenvat Credit Rules for distribution of input service tax credit by Input Service Distributor (ISD) under centralised registration.

In the pre-budget proposal, Pharmexcil has stated that presently, the companies who had taken centralised registration, with ISD were unable to distribute the input service tax paid on the specific or common services used for the Loan Licence Locations / Job-worker premises. This is because, as per Rule 7 of Cenvat Credit Rules, 2004, the ISD can only distribute the credit to his manufacturing units or units providing output services and not to Loan Licence /Job-work Locations.

The exporters say, “The definition of 'UNIT' in the explanation to Rule 7 of Cenvat Credit Rules, 2004 does not include Loan Licence/Job-work Locations. Last year the CBE&C issued a draft circular inviting suggestions on this from trade but did not consider our suggestion of inclusion of Loan Licence /Job-worker Location in the definition of 'UNIT' in explanation to Rule 7 of Cenvat Credit Rules, 2004.”

Hence, the Pharmexcil has suggested to include Loan Licence /Job-work Location in the definition of 'UNIT' in explanation to Rule 7 of Cenvat Credit Rules, 2004 more specifically in view of recognising the concept of Loan Licence under Central Excise and also giving exemption to the principal manufacturer from taking registration under Rule 9 of Central Excise Rules, 2002

Rule 7 of the Cenvat Credit Rules provides for the manner of distributing the Cenvat Credit of the tax paid on the input services. Rule 7 was amended from July 1, 2012 to provide that credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units to which the service relates during the same period.