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 You have to exercise the option in writing with the details given in the said Rule which cannot not be withdrawn in the remaining part of the FY.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

Trading Service Provider Seeks CENVAT Credit on Rent; Options Under Rule 6 Discussed for Cost-Effective Compliance A trading and service provider inquires about claiming CENVAT credit on rent paid for premises used for both trading and taxable services. Two responses suggest options under Rule 6 of the CENVAT Credit Rules, 2004. The first advises maintaining separate accounts for exempted and taxable services or reversing credit for exempted services. The second response emphasizes the difficulty of maintaining separate accounts and recommends either paying 6% on exempted services or reversing proportionate credit monthly, with the latter being potentially more cost-effective. The chosen option must be documented and cannot be changed within the fiscal year.