input credit of CENVAT

[sridhar oruganti]

Dear sir,

 

Our core business in trading and servicing of medical equipments. We received input credit by way of couriers charges, clearing charges paid for import equipment , AMC & labour charges involved in trading the medical equipments.

Our main issue is that we are not segregating the cost on the basis of tragding and service separately.  can we take the service tax paid on account of above mentioned as input credit even if we are unable to distinguish between the trading / service.

 

thanks and regards

sridhar oruganti

[K Balasubramanian]

An explanation was added on 01.04.2011 to the definition of exempted service to clarify that trading shall be treated as exempted service. Hence, you can avail only proportionate credit as provided in CCR

 

However, only actual margin or 10% of sales value, which ever is higher is to be considered for valuation.

[Vijay kumar]

Dear Sir, as per your query, you are providing both taxable and exempted services and are availing cenvat facility, without maintaining separate accounts. In such a case, you have to follow Rule 6(3) according to which you have two options (in your case) - pay 5% of the value of tradeing service OR reverse proportionate credit as detailed under sub-rule 3(A) thereof. Regards-Vijay Kumar.

AI Summary

Input credit restriction: trading treated as exempted service limits CENVAT credit; option to pay flat share or reverse proportionate credit
Trading is treated as exempted service, limiting CENVAT/input credit to a proportionate amount under the CENVAT Credit Rules; valuation for apportionment uses the actual margin or a prescribed minimum margin, whichever is higher. If accounts are not segregated between trading and taxable services, the taxpayer must either make the prescribed fixed-share payment or compute and reverse proportionate credit under the statutory apportionment mechanism.