Transport of goods by rail

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 November 2013 My client is engaged in Logistic Business. Cent percent of the cargo is transported by Rail.This client has taken a bogie on lease from the Indian Railways and pays lease charges along with applicable service tax at 3.708%.

Query:
Now, the client uses the bogie for transport of different kinds of cargo which includes sarees, newspapers, agarbathi's etc. Newspapers are exempt from service tax and hence the client does not charge service tax to the parties. But however, the client has to pay the service tax on the whole space that he has taken on lease. Since they transport newspapers they cannot collect tax from the parties and hence CENVAT Credit to that extent is not available to him. Can somebody guide me on this matter ?

CA. Narottam Kumar Rawat

CA. Narottam Kumar Rawat (Expert)
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10 November 2013 Hi,

In such case you need to reverse CENVAT Credit in respect to Exempted Turnover in accordance with Rule 6 (3) of CENVAT Credit.

There are three methods:

1. Either maintain separate set of books of accounts- that is not feasible in you case.
2. Pay 6% of value of exempted services.
3. reverse proportionate cenvat credit (exempted to total turnover).

Check which option is beneficial and feasible in your case.