EXEMPTIONS FROM SERVICE TAX - RECENT NOTIFICATIONS

[Mr. M. GOVINDARAJAN]

INTRODUCTION:

Section 93 of the Finance Act, 1994 ('Act' for short) empowers the Central Government to exempt any service or part of service from service tax by issuing notification or by making a special order if the circumstances so warrant. The Central Government is issuing exemption notifications from time to time. Every notification issued under Section 93 is to be placed before each House of Parliament while it is in session(s) for a minimum period of 30 days which may be comprised in one session or in two or more successive sessions.

The Central Government has issued notifications recently granting exemptions to certain service from service tax. The same is to be discussed in this article.

CLUB OR ASSOCIATION:

Section 65 (105) (zzze) of the Act defines the taxable service rendered by club or association in relation to provision of service facilities or advantages for a subscription or any other amount. Vide Notification No. 16/2009-Service Tax; dated 7th July, 2009 the Central Government gives exemptions to 22 associations situated in New Delhi, Kolkatta, Mumbai, Cochin, Chennai, Hyderabad, and Gurgaon from the whole of the service tax leviable under Section 66 of the Finance Act. This exemption is available to these associations up to and inclusive of 31st March, 2009.

SERVICES RECEIVED BY EXPORTER OF GOODS:

Vide Notification No.17/2009-Service Tax, dated 7th July 2009 the Central Government exempts the taxable services specified received by an exporter of goods pertaining to sub clauses (105) of Section 65 of the Act from the whole of the service tax subject to conditions specified. The Notification further provides that-

> The exemption shall be claimed by the exporter for the specified service received and used by him for export of the said goods;

> The exemption claimed by the exporter shall be provided by way of refund of service tax paid on the specified service used for export of the said goods;

> The exporter claiming the exemption has actually paid the service tax on the specified service to provider;

> No CENVAT credit of service tax paid on the specified service used for export of said goods has been taken under the CENVAT Credit Rules, 2004.

Manner of granting exemption:

The above said exemption shall be given in the following manner:

> The person liable to pay service tax under Sec.68 of the Act on the specified service provided to the exporter and used for export of the said goods shall not be eligible to claim exemption for the specified service;

> The manufacturer-exporter, who is registered as assessee under the Central Excise Act, 1944 or the rules made there under shall claim the exemption by filing a claim for refund of service tax paid on specified service to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the factory of manufacture, in Form A-1;

> The exporter who is not registered under the provisions of Central Excise Act, shall before filing a claim for refund of service tax, file a declaration in Form A-2 with the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having the jurisdiction over the registered office or the head office, as the case may be, of such exporter;

> The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall, after due verification, allot a service tax code number to the exporter within seven days from the date of receipt of the said form;

> The exporter shall file the claim for refund of service tax to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the factory of manufacture, registered office or the head office, as the case may be, of such exporter in Form A-1;

> The claim for refund shall be filed within one year from the date of export of the said goods. The date of export shall be the date on which the proper officer of Customs makes an order permitting and loading of the said goods for exportation under Section 51 of the Customs Act, 1962;

> For each taxable service the exporter shall enclose all the documents specified with the claim of refund;

> No refund claim shall be allowed if the same is for an amount less than rupees five hundred;

> Where the total amount of refund under a claim is up to 0.25% of the total declared free on board value of export or the exporter is registered with Export Promotion Council sponsored by the Ministry of Commerce or the Ministry of Textiles each document specified shall be enclosed with the claim. Invoice, bill or challan or any other document issued in the name of the exporter, showing payment for such service availed and the service tax payable shall be submitted in original after being certified in the following manner:

> Where the exporter is a proprietorship concern or partnership fir, the documents enclosed with the claim shall be certified by the exporter himself and where the exporter is a limited company, the documents enclosed with the claim shall be certified by the person authorized by Board of Directors;

> Where the documents enclosed with the claim shall contain a certificate from the exporter or the authorized person to the effect that specified service, to which the document pertains, has been received, the service tax payable thereon has been paid and the specified service has been used for export of goods under the shipping bill number;

> Where the amount of refund sought under a claim is more than 0.25% of the declared free on board value of export, such certification, shall be done by the Chartered Accountant who audits the annual accounts of the exporter for the purposes of the Companies Act, 1956, as the case may be;

> The concerned Central Excise Officer, after satisfying himself that-

> The claim filed is complete in every respect;

> All the documents requiring certification have been filed after due certification; and

> About the arithmetical accuracy of the claim

shall refund the service tax paid on the specified services within a period of one month from the receipt of said claim. If the concerned officer has reason to believe that the claim or the enclosed documents are not in order or that there is reason to deny such refund, he may, after recording the reasons in writing, take action, in accordance with the provisions of the Act and the rules made there under;

> Where any refund of service tax paid on specified services utilized for export of said goods has been paid to an exporter but the sale proceeds in respect of the said goods have not been realized by or on behalf of the exporter in India within the period allowed under the Foreign Exchange Management Act, 1999 including any extension of such period, such service tax refunded shall be recoverable under the provisions of the said and the rules made there under, as if it is a recovery of service tax erroneously refunded.

Specified services exempted:

The following are the specified services received by an exporter of goods given exemption:

> By insurer, including a re-insurer carrying on general insurance business in relation to insurance of goods exported;

> By a port or any person authorized by the port in respect of the export of the goods;

> By a technical testing and analysis agency, in relation to technical testing and analysis of goods;

> By a technical inspection and certification agency in relation to inspection and certification of export goods;

> By other port or any person authorized by that port in respect of export of goods;

> Transport of goods from the inland container depot to the port of export, and services provided to an exporter in relation to transport of export goods directly from the place of removal to inland container depot or port or airport, as the case may be, from where the goods are exported;

> Specialized cleaning services namely disinfecting, exterminating, sterilizing or fumigating or containers used for export of goods;

> For storage and warehousing of goods;

> By a courier agency to an exporter in relation to transportation of time sensitive documents, goods or articles relating to export, to a destination outside India;

> By a customs house agent in relation to export goods exported by the exporter;

> Services provided in relation to collection of export bills; export letters of credit such as advising commission, advising amendment, confirmation charges and service of purchase or sale of foreign currency, including money changing provided to an exporter in relation to export goods;

> Supply of tangible goods for use, without transferring right of possession and effective control of tangible goods;

> By a clearing and forwarding agent;

> Terminal handling charges.

Vide Notification No.18/2009-Service Tax, dated 7th July, 2009 the Central Government exempts the taxable service received by an exporter of goods and used for export of goods of the description specified below from the whole of the service tax leviable there on Sec. 66 and Sec. 66A of the Act, subject to the conditions specified:

> Service provided to an exporter for the transporter of the said goods by road from any container freight station or inland container depot to the port or airport, as the case may be, from where the goods are exported; or

> Service provided in relation to transport of goods by road directly from their place of removal, to an inland container depot, a container freight station, a port or airport, as the case may be, from where the goods are exported;

> Service provided by a commission agent located outside India and engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported by him.

BANKING COMPANY:

Sec. 65(105) (zm) of the Act defines the taxable service as the service provided or to be provided to any person by a banking company or a financial company, or any other body corporate for commercial concern, in relation to banking and other financial services.

Sec. 65 (105) (zzk) of the Act defines the taxable service as the service provided or to be provided to any person by a foreign exchange broker, including an authorized dealer in foreign exchange or an authorized money changer, other than a banking company or a financial institution including a non banking financial company or any other body corporate or commercial concern referred to in sub clause (zm).

Vide Notification No.19/2009-Servce Tax, dated 7th July, 2009 the Central Government exempts the taxable service, referred to in sub clause (zm) or (zzk), as the case may be, of clause (105) of the Act, provided to a scheduled bank, by any other scheduled bank, in relation to the inter bank transactions of purchase and sale of foreign currency, from the whole of the service tax leviable thereon under Sec. 66 of the Act.

TOUR OPERATOR:

Vide Notification No. 20/2009-Service Tax, dated 7th July, 2009 the Central Government exempts the taxable service referred to in sub clause (n) of clause (105) of Sec. 65 of the Act (Tour operator service) provided or to be provided to any person by a tour operator having a contract carriage permit for inter state or intra state transportation of passengers, excluding tourism, conducted tours, charter or hire service, from whole of the service tax leviable thereon under Sec. 66 of the Act.