cenvat credit on rent paid on premises

[Guest]

Dear sir/mam,

we are dealing in trading activities and also provider of more than one taxable services out of one is like tranport of goods by road on which we claim abatment while paying service tax. Presently we are paying rent with service tax of premise which are used both in trading activities and providing output services. Please guide me how to take credit of service tax paying on rent and in what proportion. if there is also any rule, notification,or any circular then also let me know about it. Please reply as earliest possible.

[YAGAY andSUN]

You may maintain the two separate set of books of accounts for exemtped service and taxable services and avail the CENVAT credit on that services which are used for providing taxable services or

You may pay an amount equal to 6% on the exempted services or

You may reverse the equivalent cenvat credit attributed to the exempted service or calculate such amount through a formula as mention in the Rule 6(3A).

[Vijay kumar]

Yours is a case of provision of taxable and exempted services since trading is defined as exempted service. Hence you have to follow the provisions of Rule 6 of Cenvat Credit Rules, 2004, according to which you have three options - (i) maintain separate account (means no credit to the extent of exempted service); if you take credit on the input services - (ii) pay 6% of the value of exempted services every month; or (iii) reverse proportionate credit every month as per the formula given in sub-rule 3(A) thereof. In your case, maintaining separate account for input services like GTA or renting is not possible since seggregating proportionately from input stage to ouptut stage is difficult. Hence you are advised to go for the other two options, among which perhaps the last option will be cheaper. You have to exercise the option in writing with the details given in the said Rule which cannot not be withdrawn in the remaining part of the FY. For further queries, if any pls mail to [email protected]

AI Summary

Cenvat credit apportionment: elect separate accounts, pay prescribed levy, or reverse proportionate credit for mixed-use inputs. Cenvat credit for rented premises used for both exempted and taxable services must be managed by one of three alternatives: maintain separate accounts limiting credit to taxable-use inputs; pay the prescribed levy on exempted-service value; or reverse credit proportionately using the statutory apportionment formula. The assessee must choose the option in writing for the financial year; where input-stage segregation is impractical, pay the levy or apply proportionate reversal, the latter often being more economical.