Claim of Input Credit

[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.

[Guest]

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

Brokerage Firm Seeks Input Credit Guidance: Allocation, Proportional Claims, and Rule 6(5) for Certain Services Explained. A share brokerage firm inquires about claiming input credit for services used in both taxable services and trading activities. One response suggests using allocation principles to value input services for taxable services and claim credit accordingly. Another advises claiming Cenvat credit proportionately, with full credit available for certain services and capital goods. A third response explains that trading activities are exempt from service tax, and suggests maintaining separate accounts for taxable and exempted services, or opting for specific rules under Cenvat Credit Rules for claiming credit. Full credit is available for certain services as per rule 6(5).