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WHATS NEW » SERVICE
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Availing refund of excess credit-II: Finance ministry provides clarification (Circular no. 120/01/2010)
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Jan 27, 2010:
The finance ministry has provided the following clarifications on the refund of excess credit:
8There cannot be different yardsticks for establishing the nexus for taking of credit and for refund of credit. The following test can be used to see whether sufficient nexus exists. 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. In the case of BPOs/call centres, the services directly relatable to their export business are renting of premises; right to use software; maintenance and repair of equipment; telecommunication facilities; etc.
8On the problem of co-relation and scrutiny of large number of documents, the self certification process has been simplified.
8As regards the quarterly filing of refund claims and its applicability, since no bar is provided in the notification, there should not be any objection in allowing refund of credit of the past period in subsequent quarters. It is possible that during certain quarters, there may not be any exports and therefore the exporter does not file any claim. However, he receives inputs/input services during this period. The input credit may be carried over to a subsequent quarter and a refund may be claimed.
8In case of incomplete invoices, the department should take a liberal view in view of various judicial pronouncements by Courts. In the case of refund under Rule 5, (i) so far as the nature of the service which has been received by the exporter can be ascertained; (ii) tax paid therein is clearly mentioned; and (iii) other details as required under rule 4(a) are mentioned, the refund should be allowed if the input service has a nexus with the service/goods exported as discussed earlier. In any case, the suggested Chartered Accountant's certificate should clearly bring out the nature of the service and this will assist the officer in taking a decision.
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Availing refund of excess credit-I: Exporters of services list their woes (Circular No.120/01/2010)
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Jan 27, 2010:
Some exporters of services (mainly the call centres or the BPOs) have claimed that they are facing difficulties in getting refund under availing refund of excess credit. In order to ascertain the causes for such delay a number of meetings were held with the refund sanctioning authorities. During these meetings the officers pointed out the following legal/procedural impediments partly responsible for such delays:
8The major reason causing delay in granting refunds as well as rejecting the claims is that as per the wordings of the notification, refund is permitted of duties/taxes paid only on such inputs/input services which are either used in the manufacture of export goods or used in providing the output services exported. As against this, the phrases used in the CENVAT Credit Rules permit credit of services used ?whether directly or indirectly, in or in relation to the manufacture of final product? or ?for providing output service?. The field formations tend to take the view that for eligibility of refund, the nexus between inputs or input services and the final goods/services has to be closer and more direct than that is required for taking credit. Many refund claims are being rejected on this ground.
8Even if a nexus is considered acceptable, the officers processing the refund claims find it difficult to co-relate goods or services covered under a particular invoice with a specific consignment of export goods or specific instance of export of service.
8As per the notification, the claims are to be filed quarterly. For large exporters, the procurement of inputs/input services in a quarter is substantial resulting in each refund claim being accompanied with hundreds of invoices. Verification of these documents with corroborative documents showing exports (such as export invoices, bank certificates, shipping bills) consumes a long time.
8Though the notification prescribes that refund claims should be filed quarterly in a financial year, it is not clear whether the refund is eligible only of that credit which is accumulated during the said quarter or the accumulated credit of the past period can also be refunded.
In certain cases, the invoices accompanying the refund claim are incomplete in as much as either the description of service or its classification is not mentioned. In some cases, even the name of the receiver of the inputs/input services is also not mentioned.
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Foreign Agency Commission on exports goods is 10% of FOB value
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Dec 22, 2009:
8A circular released by the Tax Research Unit of the Department of Revenue, under the Ministry of Finance, has clarified that for the purpose of service tax refund, the maximum allowable foreign agency commission on export goods continues to be 10% of the FOB value of export goods.
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Service Tax : Notification
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Dec 07, 2009:
8According to a notification released by the Ministry of Finance, service tax will not be payable from September 1, 2009 to September 22, 2009 on business auxiliary services provided by a service provider to a service receiver during the course of manufacture or processing of alcoholic beverages.
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