SERVICE TAX REFUND FOR EXPORTERS

REFUND OF SERVICE TAX PAID BY EXPORTERS

1.) INTRODUCTION

The Commerce Minister of India, Mr. KAMAL NATH had announced in his Foreign Trade Policy that exporters will not be charged service tax in order to mitigate there cost and enhance there international competitiveness. But the Finance ministry was not agreeing to the same. Both ministries have long discussing to finalize the same. Today, the Notification No. 40/2007-ST, dated: 17-09-2007 has been issued which provides for the refund of the service tax paid by the exporter. The notification allows the exporters to claim refund of the service tax paid by them provided they fulfill the conditions mentioned there under the notification. This article attempts to give a quick analysis of the key factors of this notification.

2.) CONDITIONS TO BE FULFILED

The notification specifies that to avail the refund the exporter has to satisfy certain conditions. The conditions mentioned therein are as follows: -

Ø The exemption (i.e. refund) should be claimed by the exporter of the goods for the specified services received and used by the exporter for export of the said goods only;

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

Ø The exporter claiming the exemption has actually paid the service tax on the specified services;

Ø The exemption or refund shall not be claimed except under the said notification.

3.) SPECIFIED SERVICES

S.NO.	TYPE OF SERVICE
1	Port Services provided for export. (Section 65[105][zn] )
2	Other port Services provide for export. (Section 65[105][zzl])
3	Services of transport of goods by road from ICD to port of export provided by Goods Transport Agency. (Section 65[105][zzp])
4	Services of transport of export goods in containers by rail from ICD to port of export. (Section 65[105][zzzp]).

Thus, the refund is to provide in respect of the four services only. The logic of Finance ministry is that exporter can claim Cenvat credit on the rest of services. They will be allowed the refund under Rule 5 of Cenvat credit Rules for the rest of services. But the credit is not available for above listed services. Secondly, they will be able to connect directly these services with the export goods. Hence the refund for only these four services has been allowed.

4.) PROCEDURE FOR CLAIMING REFUND

The Notification provides for the manner in which the exemption should be claimed. The various quotes of the notification are as under: -

o The exemption can be claimed by that person only if he is exporter of the said goods and he himself is liable to pay service tax for the said services i.e. he is both exporter of goods and person liable to pay service tax.

o The claim of refund by the exporter should be by way of filing a “claim for refund of service tax” paid on specified services. The exporter will have to enclose respective documents evidencing that the goods have been exported and service tax thereon have been paid.

o The claim for refund should be filed on a quarterly basis, within sixty days from the end of the relevant quarter during which the said goods have been exported.

o There after the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise as the case may be will allow the refund after satisfying themselves that all the provisions have been complied with.

o Where any refund of service tax has been paid to an exporter but the sale proceeds in respect of the said goods have not been realised by the exporter within the period allowed under the FEMA, 1999 then, such service tax refunded shall be recoverable as if it is a recovery of service tax erroneously refunded.

5.) CONCLUSION

The Finance ministry has not provided what has been demanded by the exporters. Firstly, it is not exemption but the refund. The exporter has to waste his time and money in the department for getting the refund. As we all know that it is very difficult to get the refund from the department. In place, a simple procedure which is available for the goods under Rule 19 should have been prescribed. Secondly, all the input services have not been included in the same as desired by the commerce minister and exporter. Thus, all the exporters will not be benefited from the same. Like Handicraft exporters cannot claim the Cenvat credit as there final product is exempt from the duty. Thus, it is half hearted approach on the part of the Finance minister. Moreover, it took around six months to finalize the scheme. Why there is lack of the communication and co-ordination between these two main arms of the Government. There are still many other promises made by Commerce minister in Foreign Trade Policy but the Finance Ministry is not coming with the amendments in Custom notifications. This create undue harassment for the exporters.

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SERVICE TAX REFUND FOR EXPORTERS

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