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TMI BlogDraft Circular on Refunds in Service TaxX X X X Extracts X X X X X X X X Extracts X X X X ..... nder notification 05/2006. Resultantly, the issue has spawned delays and disputes, which has necessitated the issue of this clarification. 2. The issue of eligibility of input services to refund under notification no. 05/2006 has been addressed in Circular No. 120/01/2010-ST dated 19th January, 2010 in paragraph 3.1. The criterion laid down in this paragraph for determining the eligibility states that "in case the absence of such input/input service adversely impacts the quality and efficiency of the provision of service exported, it should be considered as eligible input or input service". This criterion has not been very useful as it is found to be too conceptual and not easily translatable into objective tests that could help in deciding actual cases. Thus a need has been felt for further elaboration by the Board on this issue. 3. The objective that is sought to be achieved by the refund of cenvat credit under notification 05/2006 is to zero-rate the exports. Zero-rating means that the goods and services that are exported from the country should not be burdened with any excise or service taxation. For a 100% exporter who has no domestic business this can be realized only when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to providing the output services. Accordingly, the method to be followed for determining eligibility to refund can be summed up in the following principles: (1) Check that the service on which refund is claimed satisfies the definition of input service that is given in Rule 2 (l) of the CENVAT Credit Rules, 2004. (2) Next, service is eligible to refund unless facts of the case indicate that the benefit of the service has gone exclusively into domestic business with no spill over what-so-ever into export business. (3) The second principle mentioned at sub-para (2) above is to be given a strict construction. Disqualification on this account would be an exception rather than a rule and should be done only when there is unmistakable indication that the benefit of the service has not gone into export business what-so-ever. (4) The level at which a determination shall be made of whether the input service has gone exclusively into domestic business or not shall be at the level of the „input service invoice‟. The officer scrutinizing the claim will not disaggregate the invoice and extract elements from it and state that these elements have exclusively contributed to domesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the company's business which are essential for maintain orders and efficient work of the business i.e. export of services. 3 Asset management service 65(105)(zzzzc) Should not be allowed in case for personal use of employees. May be allowed when used for Banking and other financial services. 4 Banking and other financial services 65(105)(zm) & (zzk) Should not be allowed in case for personal use of employees. These input services are required for issuance of bank guarantee for overseas project / other business activities. 5. Business auxiliary services 65(105)(zzb) These input services are required for procurement of orders and some similar activities. 6. Business exhibition services 65(105)(zzo) These services would be required for furtherance of business activities. 7. Business support services 65(105)(zzzq) Accounting payroll, transaction processing, routine administration, customer relationship management, telemarketing and IT support services are taken by the company to maintain the day to day operations of the company and are very much the input services on which refund would be eligible. 8. Cargo handling service 65(105)(zr) Should be allowed as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 Credit rating agencies 65(105)(x) These services are used for professional purposes. 20 Custom house agent's services 65(105)(h) These services are used for professional purposes in relation to exports. 21 Design services 65(105)(zzzzd) These services are required for making designing of consumer products, industrial products, packages, logos, graphics, website and corporate identity designing and production of three dimensional models. Without these services output services cannot be provided. 22 Development and supply of content service 65(105)(zzzzb) These services are required towards marketing efforts of the company concerned and as such have a clear nexus with the output activities. 23 Dry cleaning services 65(105)(zt) Should not be allowed in case for personal use of employees. Should be used only for office cleaning / maintenance. 24 Erection, commissioning or installation service 65(105)(zzd) Should not be allowed in case for personal use of employees These services rendered in connection with office premises or office equipment would have a direct nexus with the output activities. 25 Event management service 65(105)(zu) Should not be allowed in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Management, maintenance or repair service 65(105)(zzg) A company procures services maintenance and repair of office premise, office equipments etc. The management, maintenance & repair service of office building is essential for conducting the business including exports. 37 Mandap keeper's services 65(105)(m) Should not be allowed in case services are procured as a staff welfare measure. As per Circular 120/01/2010-ST dated 19 January 2010, it should not be for entertainment or staff welfare. However, for activities relating to business, it should be allowed. 38 Manpower recruitment or supply agency's services 65(105)(k) Procurement of manpower is a basic requirement of the industry and for which it has to engage recruitment agencies. The procurement of these services is essential in view of the high labor turnover and in order to identify the right person for the right job at the right time. An organization can't operate without appropriate people. 39 Market research agency's services 65(105)(y) Required for business related activities. 40 On-line information and database access or retrieval services 65(105)(zh) A company does market analysis, studies economic facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata. 53 Service of permitting commercial use or exploration of any event organised by a person or organisation 65(105)(zzzzr) Should be allowed for business use. 54 Service relates to short term accommodation 65(105)(zzzzw) Should not be allowed in case for personal use of employees Should be allowed for business use. 55 Sponsorship services 65(105)(zzzn) Should not be allowed in case services are procured as a staff welfare measure. As per Circular 120/01/2010-ST dated 19 January 2010, it should not be for entertainment or staff welfare. Should however be allowed for business use. 56 Steamer agent's services 65(105)(I) Should be allowed. 57 Stock broker services 65(105)(a) Should not be allowed in case for personal use of employees Should be allowed for business use. 58 Storage and warehousing service 65(105)(zza) Should be allowed. 59 Survey and map-making service 65(105)(zzzc) Should be allowed for business use. 60 Technical inspection and certification service 65(105)(zzi) This input service is related to export of service which is mainly used for inspecting the items which are exported to other country at the ports and other places. Should be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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