Cenvat credit on Proportionate basis

[sunil mehta]

1)A proprietory firm is carrying on trading activities in yarn.They are yarn dealers for many yarn manufacturers. 2)They also get commission on sale of their yarn products every month. 3)o other actvity is carried on except yarn trading & commission income. 4)Proprietory firm has incurred foll: common expenditure in carrying out above two activities from same premises: ---i)telephone /mobile exp ---ii)audit fees/c.a.consulting fees ---iii)constructon of office premises(major renovation rs.4 lacs)---eligible for 100% credit ---iv)office insurance ---eligible for 100% credit query:1)since firm is carrying out only one taxable service (other being trading of yarn)whether cen.credit on above expenditure can be claimed proportionately in ratio of yarn trading & yarn commission ? 2)since there is only one taxable services whether whole amt. of cenvat credit can be claimed commission output services? 3)If no, then in what manner?

AI Summary

Yarn Trading Firm Seeks CENVAT Credit Guidance; Rule 6 Discussed for Proportionate Credit on Common Expenses A proprietorship firm dealing in yarn trading and earning commission seeks advice on claiming CENVAT credit for common expenses incurred for both activities. The firm only provides one taxable service, commission income. Respondents discuss Rule 6 of the CENVAT Credit Rules 2004, offering three options: maintaining separate accounts, utilizing 20% of credit, or proportionate reversal of credit. It is clarified that full credit cannot be utilized at once and options I or II should be considered. The discussion highlights that input services not used for taxable output services are generally not allowed, suggesting proportionate credit based on trading and commission ratio.