11 December 2013
Trading of Goods is specifically included in exempted services, The provision of cenvat credit rule 6 of cenvat credit rule 2004 will be attracted
it is applicable for domestic trading or also export trading
if we are getting foreign currency, sub rule 6(v) & 8 (a) & (b) of Cenvat Rule 6 will not be applied
19 July 2024
Under the Cenvat Credit Rules, 2004, Rule 6 specifically deals with the availment and utilization of Cenvat credit in case of exempted services. Here’s a breakdown of how it applies to trading of goods, both domestically and for export:
### Domestic Trading of Goods:
1. **Exempted Services**: If trading of goods is considered an exempted service under Service Tax laws (prior to GST regime), the provisions of Rule 6 would restrict the availment of Cenvat credit on inputs, capital goods, and input services directly attributable to providing such exempted services.
2. **Applicability of Rule 6**: - **Availment of Credit**: Cenvat credit on inputs, capital goods, and input services used directly in providing exempted services (domestic trading in this case) is not allowed. - **Common Input Services**: For common input services used both for taxable (e.g., manufacturing for export) and exempted services (domestic trading), a proportionate credit can be availed and utilized for taxable services only.
### Export Trading of Goods:
1. **Treatment of Exports**: Goods exported out of India are generally considered as zero-rated supplies under GST. While under the earlier Service Tax regime, the export of goods itself was not considered an exempted service, the principles for availing Cenvat credit were similar.
2. **Foreign Currency Earnings**: - If goods are exported and payment is received in foreign currency, specific provisions under Cenvat Rule 6 (sub-rules 6(v), 8(a), and 8(b)) allow for certain relaxations or adjustments concerning the utilization of Cenvat credit.
3. **Conditions for Availment**: - To avail these relaxations, exporters must comply with the conditions specified under Rule 6, which may include furnishing certain declarations and maintaining proper documentation.
### Conclusion:
- **Domestic Trading**: Availment of Cenvat credit is restricted for inputs, capital goods, and input services used directly in providing exempted services like domestic trading of goods. - **Export Trading**: Goods exported are not treated as exempted services, but specific provisions apply under Rule 6 for utilization of Cenvat credit, especially when earnings are in foreign currency.
It’s essential to review the specific provisions of Rule 6 and related notifications for any updates or changes, particularly under the GST regime, which has replaced the Service Tax regime and brought in different provisions for input tax credits. For precise advice tailored to your situation, consulting with a tax advisor or legal expert specializing in indirect taxes would be beneficial.
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