Cenvat credit

[N Balachandran]

 

Dear Sir,

Under the Cenvat Credit Rules 2004, a service provider is entitled to claim the benefit of cenvat credits in respect of the excise duties paid on capital goods and the service tax   paid on    input services used for providing output service.  Where the usage is for  providing exempted service, the credits would not be admissible. Precisely for this reason the   service provider would be required to ensure proper usage of input services and avail credits on those input services used for  use of input services  for the provisions of output service excluding exempted services . 

My question is  When the service provider pay the service tax against the services which are common input services, How, the CENVAT credit to be claimed by the Service provider? what is basis for claiming CENVAT credit?.  N.Balachandran 

[Mahir S]

 

Answer to Query is already discussed at ISSUE ID NO - 3996 Dated: -06-04-2012. During the last one year period, there are no changes in the cenvat rules on the said issues.

[RENGARAJ R.K]

Dear Sir,

When inputs are used commonly for both taxable and non-taxable, the Government feels that the cenvat availed should be restricted to the taxable portion alone.

Please study rule 6 (2) & 6 (3) of  Cenvat Credit Rules where the options are available to apportion the duty amount to the exempted commodities and taxable.

 regards,

AI Summary

Cenvat credit apportionment: credits allowed only for inputs used in taxable outputs, excluding exempted services. Cenvat credit is available for excise duty on capital goods and service tax on input services only to the extent those inputs are used for taxable output services; credits are inadmissible for exempted services. Where inputs serve both taxable and exempt outputs, credit must be restricted to and apportioned for the taxable portion, with Rule 6(2) and 6(3) providing allocation options and the basis for claiming credit being the proportionate use for taxable outputs.