C&F Agent (Commision business cum trading business)

[Asked by 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 and SUN]

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

Cenvat credit eligibility: credit allowed for services supporting taxable brokerage but not for exempt trading, apportioned if common.
Cenvat credit on services is determined by the recipient activity: input credit is eligible for services used exclusively for earning taxable brokerage, not available for services exclusively used for exempt trading, and where services are common to both taxable brokerage and exempt trading a proportionate apportionment of credit is permissible under the Cenvat rules.