Export of Service Tax?
Revenue's complicated refund procedure. Commerce Minister appeased?
Once upon a time, there lived a Commerce Minister who promised the moon to his exporters whom he wanted to reward for their service to the Nation and to ensure that taxes are not exported. His colleague, the Hon'ble Finance Minister was not impressed. Actually the Hon'ble Commerce minister did not have the best of relations with the Customs Department as once a Customs officer in the Capital's Airport had the temerity to demand customs duty on the goods imported by the minister. The Commerce Minister was not one who would accept defeat. He announced that he had the Prime Minister's permission to grant the moon. The Finance minister is a genius. When a crying child asks for the moon you give it to him in a mirror. So he decided that the Commerce ministry can be silenced by a little moonlight through the mirror. And the whole world lived happily ever after.
After the Commerce minister made his fiscally impossible and politically incorrect Statement that exports will be exempted from Service Tax, there was apparently some communication gap between the Finance and Commerce Ministries and nothing happened for a good five months. Exactly five months after the Foreign Trade Policy was announced, the Revenue Department has come up with a notification exempting certain services used for exports, through a refund procedure.
The Ministry's press note says the procedure has been prescribed for services which are not inputs. "The issue of extending refund of service tax paid on taxable services, which are not "input service" but could be attributable to export goods, was examined."
The refund is entitled for
(i) Port Services provided for export. (Section 65[105][zn] of the Finance Act, 1994)
(ii)Other port Services provide for export. (Section 65[105][zzl])
(iii)Services of transport of goods by road from ICD to port of export provided by Goods Transport Agency. (Section 65[105][zzp])
(iv)Services of transport of export goods in containers by rail from ICD to port of export. (Section 65[105][zzzp])
Is it assumed that all other services used by the exporters are input services and so credit can be allowed?
What about services like Custom House Agent, courier and the most important Goods Transport services? If refund of service Tax paid on GTA can be given for transport from ICD to port, why can't it be given for transport from factory to ICD or factory to port?
Is the Revenue ministry aware that Tribunal had held that CHA and outward transport to port are not input services?
Finally what Revenue has given is not even a fraction of what the Commerce ministry promised and as usual the Press has gone to town with the news that Service Tax is exempted. Even the Economic Times today carries a news heading, Govt exempts exporters from service tax.
And how to get the refund? Simple!
1. File the claim with the jurisdictional Assistant Commissioner of Central Excise having jurisdiction of your factory. If you are not a manufacturer and do not have a factory and so no botheration from excise and if you still have the audacity to export, file the claim with the Assistant Commissioner having jurisdiction of your registered office. If you do not have a registered office - you don't deserve to export or get a refund?
2. You have to claim the refund within sixty days from the end of the quarter in which the goods were exported. When does a quarter start? Do you assume it to be April?
3. If you have not got the export proceeds within the time prescribed under FEMA, the refund will be recovered from you with interest and perhaps penalty.
4. Produce proof for the export of the goods and payment of Service Tax.
5. After that? Wait till the Assistant Commissioner decides to give you refund or issue a Show cause Notice.
6. When will you get the refund? Most likely you will not and even if you do, there is no time limit fixed for the Assistant Commissioner!
What will happen if the foreign buyer has an office in India and he pays the freight and Service Tax for the transport from ICD to the port? He is not eligible for the refund and so the Service Tax also has to be exported along with the goods.
Notification No. dated 17th September, 2007.