Claim of Input Credit

[Asked by Guest]

we are share brokers and do broking business and trading in own account. how do we claim credit for input services whre the output are taxable service as well as trading activity

[DEV KUMAR KOTHARI]

Use allocation principles- direct allocation and absorption method on reasonable basis to value input service (and tax thereon) which is used to render taxable services. And claim credit on that basis.

[Surender Gupta]

You need to avail the cenvat credit only on proportionate basis. However cenvat credit on 16 services [rule 6(5)]and capital goods is available fully.

A non manufacturring trader is one who does Trading in goods or articles or service and the said activity does not contemplate registration under Central excise or service tax. Hence under rule 2(d)(i) of the Cenvat Credit Rules 2004, it is an exempted services.The said definition as per the said rules is " exempted services means taxable services which are exempt from the whole of service tax and includes services on which no service tax is leviable under the Service Tax Act". Since you do own trades or on proprietarty accounts, no service tax is paid by you.For cenvat credit you will be covered by Rule 6.If you are maintaining separate set of accounts for taxable services like broking and exempted services like trading then you may opt for coverage under provisions of rule 6(2) but in realty it is very impractical to maintain such records and also to prove one's point.In yu opt not to maintain separate accounts then you may opt to be covered by rule 6(3)(i) or rule 6(3)(ii).It is advisable to go rule 6(3)(ii).For determination of amount to be claimed refer the procedure and provisions mentioned in 3A undere rule 6(3)(ii). Of course you will get full credit for 16 services as mentioned rule 6(5).Also bear in mind that credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service

AI Summary

Proportionate cenvat credit allocation required where input services support both taxable services and exempt trading activity.
Entitlement to cenvat credit for input services used for both taxable broking and exempt trading requires allocation by direct allocation and absorption on a reasonable basis so that credit is claimed proportionately; separate accounts permit coverage under the separate-accounts option, otherwise prescribed pooling/allocation procedures apply. Full credit is available for specified services and capital goods, while inputs and input services used exclusively for exempted activities are not eligible.