EXEMPTION TO EXPORTERS

[Dr. Sanjiv Agarwal]

Central Government had decided in September, 2007 to provide for exemption to exporters for service tax paid on certain input services vide Notification No. 40/2007-ST dated 17.09.2007. Soon, this notification was superseded by Notification No. 41/2007-ST dated 06.10.2007.

Accordingly, exemption has been provided by way of a refund only and it is not a pure or straight exemption. The exemption (in form of refund) is subject to fulfillment of certain conditions and complying with procedural requirements and verification.

This exemption for exporters is explained hereunder for the benefit of readers of taxmanagementindia.com

Authority          Notification No. 40/ 2007-ST dated 17.09.2007 as superseded by Notification No. 41 /2007-ST dated 06.10.2007 (amended from time to time).

Circular            Circular Nos 101 dated 12.5.2008, 106 dated 11.12.2008, 112 dated 12.3.2009

Effective date    w.e.f. 17.9.2007

Applicability     To taxable services specified in the notification  (as amended) received by an exporter and used for export of goods.

Exporters          Exporter of goods (exporter of services is not covered)Covered

Taxable services on which refund benefit would be allowed

S.No.  Taxable Service          Clause of        w.e.f.            N. No.
                                           section 65(105)

1.     Port Services                          zn            17.9.2007    40/2007-ST

2.     Other port services                zzg           17.9.2007    40/2007-ST

3.     GTA Services                       zzp           17.9.2007    40/2007-ST
(from ICD to port)

4.     Containerised rail                  zzzp           17.9.2007    40/2007-ST
transportation services
(from ICD to port)

5.     General Insurance                  zd            6.10.2007    41/2007-ST
Service                                   

6.     Technical testing and              zzh           6.10.2007    41/2007-ST
analysis service                       

7.     Technical Inspection               zzi            6.10.2007    41/2007-ST
& certification service              

8.     Cleaning services                  zzzd           29.11.2007  42/2007-ST

9.     Storage & warehousing
services                                         zza           29.11.2007  42/2007-ST

10.   Courier services                      f             19.2.2008    3/2008-ST

11.   GTA services                        zzp           19.2.2008    3/2008-ST
(from place of removal
to ICD or port)

12.   Containerised rail                  zzzp           19.2.2008    3/2008-ST
transportation services
(from place of removal
to ICD or port)

13.   Custom house agents               h             1.4.2008      17/2008-ST

14.   Banking and other                  zm            1.4.2008      17/2008-ST
financial services

15.   Business auxiliary                   zzh           1.4.2008      17/2008-ST
services (commission)

16.   Banking and other                  zm            16.5.2008    24/2008-ST
financial services
(forex and money
changing)

17.   Forex broking                      zzzk          16.5.2008    24/2008-ST  
(other then S No 16)

18.   Supply of tangible                 zzzzj          16.5.2008    24/2008-ST
goods

19.   Clearing and forwarding         (j)            7.12.2008    33/2008-ST

        services

Conditions

1. Exporter should be engaged in export of goods.

2. Exporter should receive specified taxable services and use them for export of goods (use is a important condition).

3. Exporter should pay/have paid service tax on taxable services received and used.

4. On such services, Cenvat credit should not have been taken under Cenvat Credit Rules, 2004.

5. Exporter should not avail any drawback of service tax paid on such taxable service under drawback rules.

6. The exemption is not automatic and it has to be claimed.

7. Exporter should be registered with Central Excise or Service Tax. Alternatively, he will have to file a declaration form against which exporter will be allotted a  service tax code (STC) before claiming the exemption .

8. Person liable to pay service tax should pay/have paid service tax on such services and he should not claim exemption, i.e., service must have been paid and only the exporter shall be eligible to claim this exemption. In case person liable to pay service tax and exporter are same, in such cases only, that person can claim the exemption.

9.  The exemption has to be claimed by way of filing a claim of refund as per the Refund form prescribed under Centre Excise Act.

10. Refund claim has to be filed quarterly and quarters shall be normal calendar quarters within 60  days (six months w.e.f. 18.11.2008) from the quarter end, in  respect of goods exporter during the quarter.

11. Consequent upon revision of limitation period, any refund claim that is filed within such revised limitation period would be admissible if it is otherwise in order.

12. Refund is admissible on the basis of gross amount received for the exports.

13. In case of FIRCs  issued on consolidated basis, the exporters should submit self certified statement alongwith FIRC showing the details of export in respect of which the FIRC pertains.

14. The limitation period of six months is to be computed from the date of exports .

15. Refund are not admissible on such services received prior to the date they are notified in the said notification.

16. Certified copy of the documents will be accepted in normal course.

17. Date of export shall be reckoned as the date on which custom officer orders clearance/ loading for exportation .

18. Claim of refund must be accompanied with-

-     evidence of export of goods (invoice, shipping documents etc).

-     evidence of payment of service tax on specified services (invoice, payment proof etc.)

-     copy of agreement  or purchase order.

19.   The compliance of condition that exporter has actually paid the service tax rests  with the exporter claiming refund.

20.  The department will carry out independent verification and for big refunds, audit may also be carried out.

21. Exporter should ensure that invoices/ bills /challan should contain requisite details.

22. Claim should  be filed with jurisdictional Assistant or Deputy Commissioner of Central Excise having jurisdiction over factory or warehouse and in case of exporter, over head office or registered office of exporter.

23. Assistant / Deputy Commissioner after satisfying himself about actual usage of specified service for exports shall refund the amount of service tax so paid.

24. If exporter does not recover the sale proceeds within prescribed period (under FEMA), such service tax refunded shall be recoverable.

25. Declaration should be filed in prescribed Form .

26. Declaration has to be submitted prior to refund claim and even prior to actual export takes place looking to the language in para (10) of the said declaration      form.

 

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Discussions to this article

[S. B. Kakade]

Being manufacturer exporter whether Cenvat Credit can be availed for payment of duty on finished goods if Refund is not claimed under this Notfn.? If not whether. there are restrictions under the provisions of the CCR, 2004

[sanjiv]

Cenvat is applicable only in relation to inputs/ input services and not duty on finished goods

[S. B. Kakade]

Whether manufacturer exporter can avail Service Tax Credit for the Service Tax paid on export services i.e. Commission paid to the Overseas Commission Agent instead of claiming Refund under Notfn. No. 41/2007-ST as amended ?

[sanjiv Agarwal]

Both the options are available to exporter of goods subject to the procedural formalities prescribed in the rules/ notification

[sanjiv Agarwal]

Both the options are available to exporter of goods subject to the procedural formalities prescribed in the rules/ notification