C&F Agent (Commision business cum trading business)

[Guest]

Dear Sir,

Our company is a C&F agent of a company and earning brokerage of 50 lacs and paying service tax. Our company also has Trading business with turnover of 400 crore and same have many agents for this sales. The agents are charging service tax on us. Now we want to adjust our output service tax with Input CENVAT. Whether it is allowable?

[YAGAY andSUN]

Dear Kamal,

Trading is exempted activity under Service Tax Laws (i.e. Finance Act, 1994 as amended from time to time). Therefore you cannot avail the CENVAT credit on such services.

Regards,

Team YAGAY & SUN

(Consultants Indirect Taxes)

[Madhukar N Hiregange]

The cenvat credit of commission paid to agents for services which are used for earning the brokerage services would be eligible. If they are exclusively used for trading activity then may not be available. If they are common then part credit would be available. See Rule 6 of cenvat credit rules for what part of common services is eligible.

AI Summary

Company Seeks Guidance on Adjusting Service Tax with CENVAT Credit; Rule 6 Limits Credit for Trading Activities A company acting as a C&F agent and engaging in trading business seeks advice on adjusting output service tax with input CENVAT credit. The company earns a brokerage of 50 lakhs and pays service tax, while its trading business, with a turnover of 400 crores, involves agents charging service tax. One reply indicates that trading is exempt under Service Tax Laws, disallowing CENVAT credit. Another response clarifies that CENVAT credit is available for services used to earn brokerage but not for trading activities, with partial credit applicable for common services as per Rule 6 of the CENVAT credit rules.