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

Cenvat credit treatment: trading turnover not a service, reverse or apportion credits when inputs used for trading. Trading of goods is not a service and turnover from trading is not treated as an exempted service for Cenvat credit. If input services are not among the specified services and separate books are not maintained, the provider must prove direct nexus between input services and taxable output services; otherwise the six percent adjustment applies where relevant. When input services partly support trading activity, the service provider must reverse the credit attributable to trading or adopt an acceptable apportionment formula.