Clarification Accounting Standards (AS) 10- Capitalization of Cost - regarding General Circular No. 35/2014

General Circular No. 35/2014

F.No.17/66/2013/CL-V GOVERNMENT OF INDIA

MINISTRY OF CORPORATE AFFAIRS

5th Floor, 'A' Wing Shastri Bhawan, Dr. R.P. Road, New Delhi Dated: 27th August 2014

To

All Regional Directors,

All Registrars of Companies, All Stakeholders.

Subject: Clarification Accounting Standards (AS) 10- Capitalization of Cost - regarding.

Sir,

Government has received a number of representations seeking clarifications on

capitalization of costs in cases of Competitive Bid power projects. The clarifications sought were with regard to capitalization of borrmying costs incurred during extended delay in commercial production for  reasons beyond the  developer's· control, and  whether capitalization of power plant should be unit-wise or project-wise. The matter has been examined in consultation with the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI).

2.       Accounting Standards AS-10 and AS-16 prescribe the principles of capitalization of various costs based on the underlying concept that only such expenditure should be capitalized as form a part of the cost of fixed assets which increase the worth of the assets. Cost incurred during the extended delay in commencement of commercial production after the plant is otherwise ready does not increase the worth of fixed assets. Such costs cannot, therefore, be capitalized.

 3.       Accounting Standard AS 16, inter alia provides guidance with regard to part capitalization where some units of a project are complete. In case one of the units of the project is ready for commercial production and is capable of being used while construction continues for the other units, costs should be capitalized in relation to that part once the part is ready for commercial production.

4.       It is further clarified that AS 10 and AS 16 are applicable irrespective of whether the power projects are 'Cost Plus projects' or 'Competitive Bid projects'.

This issues with approval of the competent authority.

Yours faithfully

(S.K Verma) Assistant Director (Policy) Ph:23073067

Copy to:-

ovemance Section and web contents Officer to place this circular on the Ministry website.

2.  Guard File.

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CENVAT credit on STTG by indian railways

CENVAT Credit: Certificate by Indian Railways an eligible document

N/N 26/2014-C.E.(N.T.) dated 27th  Au g’1 4

• Service tax on transportation of goods was effectively levied w.e.f. 1st Oct’12(though levied from 1st July’12, but was deferred till 30th Sep’12).
• However, abatement of 70% was allowed vide N/N 26/2012-ST, hence effective rate of tax imposed was 3.708%.
• Ministry of Railways issued a circular- TCR/1078/2011/2,dated 27th  Jun’12 to deal with the issues arising out of the aforesaid levy & in para 4(xi) of the same, it was stated that on written request from customers, a consolidated certificate for each customer shall be issued by  the  authorised  officer  of  Indian  Railways(CCM/Dy.  CAO)    on  monthly  basis  giving following details date-wise & rake-wise:

o  Service Tax;

o  Education Cess;

o  Higher Education Cess; and

o  Total Service Tax

• It further stated that the said certificate can be used by the customers for taking CENVAT.

However,  no  corresponding  amendment  was  made  by  Ministry  of Finance  in  rule  9  of CENVAT Credit rules, 2004, which deals with the list of eligible documents for availment of CENVAT.

• Now, vide N/N 26/2014-C.E.(N.T.), rule 9 of CENVAT Credit Rules, 2004 has been amended & clause (fa) has been inserted therein to include following certificate as an eligible document for the purpose of availing CENVAT:

“a Service Tax Certificate for Transportation of goods by Rail (herein after referred to as STTG Certificate) issued by the Indian Railways, along with the photocopies of the railway receipts mentioned in the STTG certificate”.

• Henceforth, the eligibility stated vide circular issued by Ministry of Railways has finally been brought at par with CENVAT credit rules.

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