Clarification - Cenvat Credit

[ranganath shenoy]

Dear Sirs, 1)Is there a mandate in the cenvat credit rules that in a case where there is both exempted and taxable output services,the apportionmemt of credit has to be done irrespective of the fact that the input service is exclusively used for providing taxable service.2)What is the status of unutilised credit available on 31-03-2008,is old rule applicable or the new rule of apportionment.3)Can vacant land rent be considered as exempted service

[Guest]

1. As per the present Rule 6 of CCR, even in the case where the input service is exclusively used for providing output service, options as provided in Rule 6(3) is to be followed in case of non-maintenance of separate records of utilisation 2. Where Rule 6(3) is applicable, it is view of the department that unutilised credit as of 31/03/08 is not eligible for adjustment and will lapse, but i feel this is a disputed issue. 3. As renting of property is defined as service, renting of vacant land (which is not subject to tax) will be treated as exempted service as per the definition of exempted service in CCR, 2004.

[Surender Gupta]

There is no provision in Cenvat Credit rules that for certain input services you maintain separate records and for other services you maintain common records. You have to choose either of the option. Further, you are entitled to carry forward the unutilized credit.

AI Summary

Cenvat credit apportionment required when both exempt and taxable services exist; record choice affects availment and lapse. Cenvat credit for input services used where both taxable and exempt output services exist must follow Rule 6 apportionment options; taxpayers must either maintain separate records of utilisation or apply the common apportionment mechanism. The departmental stance is that unutilised credit at the transitional date will lapse under apportionment rules, a disputed point. Renting of vacant land, being a non-taxable form of renting of property, is treated as an exempted service under the rules.