Reversal of CENVAT on Inout service in goods cleared as such-Reg.

[vinay wakde]

Presently, the Trading activity has been included in the definition of  exempted service. However, Rule 6(3) D regarding reversal of CENVAT credit for exempted product/services in the case of trading is still continued. Sometimes, we are clearing the goods i.e. Input/ Capital Goods as such from our factory & reverse the proportionate CENVAT credit.

Kindly let us know whether above transactions will also be treated as trading activity and we have to reverse  proportionate CENVAT credit on Input service i.e. on GTA ? The Excise Auditors in some of the industries are taking objection for reversal of credit on Input services, treating Input /Capital goods as such as trading activity.

Regards,

VINAY

 

[YAGAY andSUN]

Removal of goods as such may overlap the Trading activities.  If you purchase the goods for manufacturing but sometimes removes goods as such then it will not fall under the category of trading.  Reverse of CENVAT credit equivalent  to availment would suffice.  But in you business module if the trading activities are in majority then you would have to act accordingly.

[Guest]

 

Input cleared as such is being treated as Trading Activity (Exempt Service). 

As Manufacture and Non Taxable Service is being carried out, assessee is required to reverse proportionate service tax credit availed on all common services attributable to both activities.

In case it is not possible to work out Trading activity Value - Notional Profit of 10% over the Sale Value is being treated as Trading Service Value.

"Trading service Value / Total Sales x 100" will provide the percentage of Cenvat of such services to be reversed.

 

Thanks

 

Sanjay

AI Summary

Reversal of CENVAT credit where goods cleared as such are treated as trading activity requires proportionate reversal of input service credits. CENVAT credit must be reversed when goods cleared 'as such' constitute trading activity treated as exempt service; occasional removals for manufacture need not be treated as trading and reversal equivalent to availment may suffice. If trading predominates, full reversal rules apply. For common input services attributable to both taxable manufacture and non taxable trading, proportionate reversal is required; where trading value cannot be computed, a notional profit of ten percent over sale value may be used and the reversal percentage computed as Trading service value divided by total sales multiplied by 100.