Application of rule 6(2)- maintain separate books of account
This query is : Open
15 April 2013
Facts of the Case:
An assesse is providing exempted services as well as taxable services in the healthcare industry.
The proportion of exempted services is substantially high than taxable services.
However, he wants to utilise CENVAT Credit against the payment of service tax for taxable services provided.
There seems no benefit in opting options under Rule 6 wherein proportionate calculation is required.
However, if the assesse maintains separate accounts for exempted aw well as taxable services, CENVAT credit will be utilised.
Query: What are the guiding principles for maintaining separate books of accounts ? How to bifurcate payment of service tax against input services for the taxable and exempted services ?
An assesse is providing exempted services as well as taxable services in the healthcare industry.
The proportion of exempted services is substantially high than taxable services.
However, he wants to utilise CENVAT Credit against the payment of service tax for taxable services provided.
There seems no benefit in opting options under Rule 6 wherein proportionate calculation is required.
However, if the assesse maintains separate accounts for exempted aw well as taxable services, CENVAT credit will be utilised.
Query: What are the guiding principles for maintaining separate books of accounts ? How to bifurcate payment of service tax against input services for the taxable and exempted services ?
16 April 2013
Rule 6 of the Cenvat Credit Rules 2004 deals with the availability of cenvat in case of Service provider is providing Exempted Service as well as Taxable Services.
You should maintain the separate set of book of account one for Taxable service & another for Exempted services.
When you are receiving any CENVATABLE Invoice (Input Service Invoice ), & if you think that this service is exclusively used for providing Taxable service then claim full cenvat
When you are receiving any CENVATABLE Invoice (Input Service Invoice ),& if you think that this service is exclusively used for providing Exempted service then do not claim any cenvat
When you are receiving any CENVATABLE Invoice (Input Service Invoice ), & if you think that this service is used for providing both Taxable service as well as Exempted service then claim the proportion manner CENVAT by calculating Taxable & non Taxable Turnover ratio.
Arvind Tiwari
09322368699
Arvindtiwari989@yahoo.com
You should maintain the separate set of book of account one for Taxable service & another for Exempted services.
When you are receiving any CENVATABLE Invoice (Input Service Invoice ), & if you think that this service is exclusively used for providing Taxable service then claim full cenvat
When you are receiving any CENVATABLE Invoice (Input Service Invoice ),& if you think that this service is exclusively used for providing Exempted service then do not claim any cenvat
When you are receiving any CENVATABLE Invoice (Input Service Invoice ), & if you think that this service is used for providing both Taxable service as well as Exempted service then claim the proportion manner CENVAT by calculating Taxable & non Taxable Turnover ratio.
Arvind Tiwari
09322368699
Arvindtiwari989@yahoo.com
16 April 2013
Mr. Arvind has answered very well.
Either pay service tax on % basis for non maintaining of separate books.
And if you want to maintain separate books than bifurcate Input/Input services used for exempted and taxable services.
Gorav Kumar Goyal
G K Goyal & Associates
Either pay service tax on % basis for non maintaining of separate books.
And if you want to maintain separate books than bifurcate Input/Input services used for exempted and taxable services.
Gorav Kumar Goyal
G K Goyal & Associates
16 April 2013
Dear Arvind & Gorav,
Thanks for the responses.
I want to know whether only Turnover principle can be applied for bifurcating the CENVAT as mentioned by Arvind
or
We can bifurcate the same on the basis of Cost Principle also.
Facts of the case: The assesse is paying rent for the building. Assesse provides taxable services as well as non-taxable services.
Now this rent paid is for the whole building and taxable services form a small part of total turnover.
Therefore, in this case, if we calculate on the basis of turnover then the percentage is very small. However, if we bifurcate the rent on the basis of area of building used for taxable and exempt services, then the assesse is able to utilise the CENVAT for taxable services.
The logic of turnover hold true where Capex is involved, but where expense is of recurring nature then bifurcation on the basis of cost centre should be done.
Also, as mentioned in the Rule 6(2), for separate maintenance of accounts, one should take cue of cost principles.
Query: Please comment on the above contention.
Thanks for the responses.
I want to know whether only Turnover principle can be applied for bifurcating the CENVAT as mentioned by Arvind
or
We can bifurcate the same on the basis of Cost Principle also.
Facts of the case: The assesse is paying rent for the building. Assesse provides taxable services as well as non-taxable services.
Now this rent paid is for the whole building and taxable services form a small part of total turnover.
Therefore, in this case, if we calculate on the basis of turnover then the percentage is very small. However, if we bifurcate the rent on the basis of area of building used for taxable and exempt services, then the assesse is able to utilise the CENVAT for taxable services.
The logic of turnover hold true where Capex is involved, but where expense is of recurring nature then bifurcation on the basis of cost centre should be done.
Also, as mentioned in the Rule 6(2), for separate maintenance of accounts, one should take cue of cost principles.
Query: Please comment on the above contention.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- CG Tax On residential property
- Post Office RD Interest
- Applicable TDS for Purchase of Flat from NRI
- Claiming exemption of perquisite for employee-owned car under New Tax Regime in ITR-2
- Eway bill for machinery reparing
- Gift of mutual fund units to daughter
- Reporting of STCG on Property in ITR
- NRI ITR2 account in 2025-26 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,.
- Not able to file ITR
- TDS exemption on resale of software
- Clarification Required on Business Code for 44ADA
- Under construction property in ITR
- Building tax payment deduction in rental Income
- Foreign inward in ITR
- PF Taxable Income
- Clarification on Tax Audit Applicability and Reporting of F&O Transactions in ITR-3
- Interest credited in FY2025-2026 & TDS therein by EPFO does not reflect in AIS or Form 26AS
- 44ad eligble money lending interest
- Delisted shares sold in off market/ Rebate u/s87A
- In Exports Sales HSN details where to fill
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
