Tax credit mechanism and evolving jurisprudence

In India, the CENVAT Credit Rules, 2004 provide for the manner of availability of tax credit on “inputs”, “input services” and “capital goods” at the federal level by a service provider or a manufacturer.

The eligibility and manner of utilization of tax credits has been the subject of much debate and litigation, especially regarding the scope of the terms “input” and “input services”, which constitute the primary eligibility criteria for the availability of tax credits.

Deliberating definitions

The applicability of the Supreme Court judgment in the Maruti Suzuki case (Maruti Suzuki Ltd v Commissioner of Central Excise) that deals with the eligibility criteria to qualify as an “input” – to “input services”, has itself has been the subject matter of divergent interpretations by two separate benches of the Tax Tribunal.

Karthik Sundaram and Stella Joseph are lawyers at Economic Laws Practice in Mumbai. They can be contacted at karthiksundaram@elp-in.com & stellajoseph@elp-in.com.