CENVAT Credit (Excise /Service Tax)
The idea behind introduction of CENVAT (known as MODVAT earlier) was to tackle the multiple taxation arising on every point of sale/provision of goods/services. The concept of CENVAT has played a major role in stabilizing the cascading effect of indirect taxes and also in reducing the ultimate prices of goods and services.
Central Excise and Service Tax derive the common benefit of CENVAT credit arising out of taxes (excise and service tax) paid on inputs, capital goods and input services availed/utilized to manufacture/produce taxable goods or provide taxable output services.
Input Tax Credits (VAT)
Similar to the CENVAT provisions, state VAT laws also bestow the benefits of tax credits of VAT paid on the goods purchased from within the state. The input tax credits are also eligible to be set off against the output CST liabilities.