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Use Businesses are allowed to set off excise duty on purchases of capital goods against excise duty on outputs. However, unlike with raw materials, you can only set off half of the duty in the first year, and the rest in any year after that. Prerequisites In the material master, you have classified the capital goods as such. Because duty on capital goods is handled using excise transaction type CAPE, you must also have specified that you want this transaction to credit the excise duty to the CENVAT on hold account. You make this setting in Customizing for Logistics General, by choosing Taxes on Goods Movements India Account Determination Specify Excise Accounts Per Excise Transaction. You must then have specified which G/L account is the CENVAT on hold account, again in Customizing for Logistics General, by choosing Taxes on Goods Movements India Account Determination Specify G/L Accounts per Excise Transaction. Features When you post an excise invoice that contains capital goods, the system posts half of the excise duty to your CENVAT account and posts the rest to a G/L account for CENVAT on hold. In following years, you can use a report to identify the capital goods with excise duty on hold and transfer the duty to the CENVAT account (see Transfer of CENVAT Credit on Capital Goods). Activities When working with excise invoices that include capital goods, note the following: Capturing vendor excise invoices When you create an excise invoice with capital goods, you have to set the material type to A (assets), C (consumables), or T (tools). Posting excise invoices When you come to post the excise invoice, the system posts only half of the excise duty to the CENVAT account. The system does not round the amount off.