What is cenvat credit?

CENVAT (Central Value Added Tax) credit is a system in India that allows manufacturers and service providers to claim credit for the taxes paid on inputs or input services used in the production of goods or provision of services. This credit can be utilized to offset the excise duty or service tax payable on the final products or services. The objective of CENVAT is to avoid the cascading effect of taxes, thereby reducing the overall tax burden on businesses. This system has been largely integrated into the Goods and Services Tax (GST) framework since its implementation in 2017.