Reversal of Cenvat credit under rule 6(3A) of Cenvat credit rules 2004 : 1/3

[satish kumar]

Assessee ‘A’ provides following services:

1. Taxable Service - Hotel accommodation service

‘A’ pays service tax @ 60% of amount billed/ received from customers after availing abatement of 40%

1. Exempt Service – Interest from bank

‘A’ receives interest from bank on fixed deposits

‘A’ avails CENVAT credit on common services used for providing abovementioned taxable and exempt services. Hence, ‘A’ needs to reverse proportionate CENVAT credit attributable to provision of exempt services under rule 6(3A) of CENVAT credit rules 2004.

		Option 1	Option 2
Particulars	Description of Service	Revenue as per P&L a/c (Rs)	Revenue on which Service tax is paid (Rs)	Remarks
Taxable Service	Hotel accommodation service	1,00,000	60,000	Service tax is paid on 60% as per provisions of Notification 26/2012
Exempt Service	Interest on fixed deposit	10,000	10,000	Covered under Negative list as per section 66D of Finance Act 1994
CENVAT Credit availed on Common services		₹ 25,000
Formula for reversal of CENVAT credit on Common services		Exempt Services provided ------------------------------------ X [ Cenvat Credit availed on Common (Exempt services provided + Services ] Taxable services provided)
Cenvat credit to be reversed		10,000 ----------- X 25,000 [10,000 + 1,00,000] = ₹ 2,273	10,000 ----------- X 25,000 [10,000 + 60,000] = ₹ 3,571

 

According to section 65B(51), 'taxable service' means any service on which service tax is leviable under section 66B

Which option is correct and why ?

[Ganeshan Kalyani]

Sir please clarify how interest received on fixed deposit will amount to service provided by you ?

AI Summary

Query on Reversal of CENVAT Credit Under Rule 6(3A) for Mixed Services Including Hotel Accommodation and Bank Interest An individual queried about the reversal of CENVAT credit under rule 6(3A) of the CENVAT Credit Rules 2004, concerning services provided by an assessee, 'A'. 'A' offers taxable hotel accommodation services and receives exempt interest from bank deposits. They avail CENVAT credit on common services used for both taxable and exempt services, necessitating a reversal of credit for exempt services. Two options for calculating the reversal amount were presented, with a query on which is correct. A respondent questioned whether interest on fixed deposits constitutes a service provided by 'A'.