Turnover tratment - cenvat credit

[RAJESH MANGAL AGRAWAL]

An output service provider provides some output service as well as involved in trading of goods. For availment of Cenvat credit of Input service,whether Turnover of Trading of goods is treated as Exempted Service And in the case of Non maintenance of Books for availing the Input Service Credit (other than the 16 specified service) 6% of The Turnover of traded goods is required to be paid. Pl. explain and if possible pl. provide the relevant case laws. Thanks & regards

[Prasanna Kumar]

Dear Sir, As per the given information, it is certain the trading of goods cannot be treated as Exempted Service under the provisions of Service Tax Law. You have also mentioned about the 16 specified service. It means your input service is not included in those specified services. As such the onus of proving that the concerned input service has direct nexus to your providing of out put service in additon to trading activity lies on you. AS per the applicable Cenvat Credit Rules, if you are not keeping separate books for availing the credit of input services, you have to pay 6% of the value of exempt service. Since we are not treating the trading of goods as service at all, you are not required to pay the 6% amount of trading of goods. But imagine a situation, wherein a part of the input service is also used in carrying on your trading activity what happens? That is why I said the onus of proving that the entire input services have been utilized on output service lies on the service provider.

[Rama Krishana]

You need to reverse the cenvat credit availed on trading goods. For this purpose, you should find a suitable formula which is acceptable to the department as well.

AI Summary

Clarification on Cenvat Credit: Trading Goods Not an Exempted Service, No 6% Payment Required on Trading Turnover. An output service provider involved in both service provision and trading of goods inquired about the treatment of Cenvat credit for input services. The query focused on whether the turnover from trading goods is considered an exempted service and the implications of not maintaining separate books for input service credit. One response clarified that trading goods is not treated as an exempted service under Service Tax Law, thus not requiring a 6% payment on trading turnover. Another response suggested reversing the Cenvat credit on trading goods and finding an acceptable formula for the department.