(This is a draft Circular proposed to be issued in order to streamline the process of sanctioning of refund claims, mainly arising on account of service tax borne on input services that have gone into exports of services in terms of notification no. 5/2006. This draft is being placed in public domain for widest possible circulation and an extensive debate from all stakeholders in trade and industry as also from all the field formations of the department. All suggestions and feedback may please be emailed at [email protected] to Shri Deepankar Aron, Director (Service Tax), CBEC (Phone No. 011-23092 747 and Fax No. 011-230922 75) by 30th November 2011. The feedback and suggestions received would be considered for revising the draft circular.)
Draft Circular No. /2011 – Service Tax (Uploaded on Website 28.10.2011)
Subject: Problems faced by exporters in availing refund of excess credit – regarding
Representations have been received both from the field and the trade regarding difficulties being faced in the determination of the input services which are eligible for refund under notification 05/2006. Resultantly, the issue has spawned delays and disputes, which has necessitated the issue of this clarification.
6. Field formations and trade have represented about the problems being faced in identifying and linking the input services that have gone into 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 domestic business. If at the level of aggregation that is reflected in an invoice, a portion of the input service that is embodied in the invoice has contributed to exports, then the entire input service invoice shall be eligible for refund.
9. It is hoped that with the issuing of this circular, smooth and expeditious disposal of exporters claims for refund shall follow. In case of any doubt, an immediate reference may be made to the Board.
Yours faithfully,
(Deepankar Aron) Director (Service Tax)
Annexure
List of Services on which refund is allowed (fully or partially)
| S. No. | Category of Service | Exclusions or Limitations, if any | Remarks |
|
1 |
Advertising agency’s services 65(105)(e) | A company hires advertising
agency for programming, broadcasting and releasing activities related to brand of the company which enhances its sales and hence is directly related to provision of |
|
|
2 |
Air travel agents services 65(105)(i) | Should not be allowed in case it is for personal use of employees | The services are procured by a
company in relation to travel of employees for conducting business meeting and attending seminars towards professional objectives. Hence it is an eligible input service for exporting the taxable output service. These services are required for travel and tour of their employees in 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. |
|
Business auxiliary services
65(105)(zzb) |
These input services are required for procurement of orders and some similar activities. | |
|
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 is used for business purposes. | |
|
9. |
Chartered accountant’s services
65(105)(s) |
Should not be allowed in case for personal use of employees. | These services are required not only for maintaining the accounts and auditing the records but also for complying with the statutory requirements. Hence, these input
services are essential for the business of export of services. Further, these services help to strengthen the internal controls for smooth functioning of the |
|
10 |
Cleaning activity service
65(105)(zzzd) |
Should not be allowed in case for personal use of employees. | Cleaning activities of the office premises are necessary to enable the employees of the company to perform efficiently. |
|
11 |
Clearing and forwarding agent’s services
65(105) (j) |
Should be allowed as it is used for business purposes. | |
|
12 |
Commercial
training or coaching service 65(105)(zzc) |
Should not be allowed in case for personal use of employees. | These services are procured by a company so that employees can get regular updates of various
changes in laws and technology during seminars, coaching or |
|
13 |
Company
Secretary Service |
These services are required for complying with the requirementsof Companies Act, 1956 as the |
assesses are normally registered
under the said Act.
14
Consulting engineer’s services 65(105)(g) Various engineers are consulted for providing advice in respect of the output service and the same is used in relation to export.
15
Convention services
65(105)(zc)
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 allowed for entertainment
or staff welfare, however for
official purposes, these are very
much valid input services.
16
Copyright services 65(105)(zzzzt)Should not be allowed in case for personal use of employeesShould be allowed as these are used for professional activities.
17
Cost accountant’s services
65(105)(t)
Should not be allowed in case for personal use of employeesShould be allowed as these are used for professional activities.
18
Courier service 65(105)(f)Should not be allowed in case for personal use of employees.These services are consumed by a Company for delivery of business documents. The delivery of these documents is essential to process transactions related to exports. Hence, a valid service.
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 employeesThese 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 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, in so far as it is for promotion of the business, it
should be a valid input.
26
Fashion designing service
65(105)(zv)
Should not be allowed in case for personal use of employees.Should be used only for office purposes.
27
Forward contract services
65(105)(zzy)
28
General Insurance Service 65(105) (d)
Should not be allowed in case for personal use of employees; it is also not allowed in so far as it
relates to a motor vehicle except when used for provision of a taxable service for which credit on motor vehicle is available as capital
goods;
Should be used only for office purposes. This could include fixed assets insurance or group insurance for official activities.
29
Goods Transport operators 65(105)(zzp)Should not be allowed in case for personal use of employees.Should be used only for office purposes.
30
Information technology
software service 65(105)(zzzze)
These services are availed for
procuring the software for runningthe operation of company. As
export of services is dependent on the better operation of company. Hence the software is an input for
providing output service. In
addition to this software is
required for the data management
31
Intellectual
property services 65(105)(zzr)
Should be used only for office purposes.
32
Interior decorator’s services
65(105)(q)
Should be allowed if used for renovation or
maintenance of office
premises only.
33
Internet telecommunication services 65(105)(zzzu)
A company uses the
telecommunication /internet telecommunication services which are essential input services for
providing output services. These
input services are consumed
essentially for providing the
output services related to the
export business and for
discharging day to day duties by
the administrative staff. Without the telephone and internet facility the services could not have been rendered.
34
Legal consultancy service
65(105)(zzzzm)
Should not be allowed in case for personal use of employees.Should be used only for office purposes.
35
Management or Business consultant’s
services 65(105)
Consultancy Services are procured for providing advice, consultancy
and technical assistance in
relation to the business and
therefore should be allowed.
36
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 industryand 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 factors and other market parameters for the
purpose of providing output
service. For this purpose online
database and other research
database are used.
41
Packaging services 65(105)(zzzf) Should be allowed.
42
Pandal or shamiana contractor’s service 65(105)(zzw)
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.
43
Photography services
65(105)(zb)
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.
44
Promotion or Marketing of Brand service
65(105)(zzzzq)
Should be allowed.
45
Public relation management service 65(105)(zzzs)
To maintain public relations,
professionals are hired in
maintaining relations with govt.
authorities and organizations.
Should be allowed
46
Rail travel agent’s services
65(105)(zz)
Should not be allowed in case for personal use of employees.Should be allowed for business use.
47
Real estate agent’s services
65(105)(v)
Should not be allowed in case for personal use of employees.Should be allowed for business use.
48.
Rent a cab service 65(105)(o)
It is not allowed in so far as it relates to a motor vehicle except when used for provision of a
taxable service for which credit on motor vehicle is available as capital
goods.
49
Renting of immovable property services 65(105)(zzzz) The premises from where the
party renders output services or premises where books of accounts of company are maintained hasbeen taken on rent and accordingly renting of immovable property is essential for operation for the output service.
50
Sale of space or time for advertisement services 65(105)(zzzm) Should be allowed for business use.
51
Scientific or technical consultancy services
65(105)(za)
Should be allowed for business use.
52
Security agency’s services
65(105)(w)
Should not be allowed when used for residential premises i.e. in case for personal use of employees.
The procurement of these services is essential for security of office buildings and equipment. Further,
business operations involve
handling of confidential data.
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 employeesShould 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 employeesShould 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 for business use.
61
Technical testing and analysis
service 65(105)(zzh)
Should be allowed for business use.
62
Telecommunication service
65(105)(zzzx)
Should not be allowed in case for personal use of employees.Should be allowed for business use
63
Transport of coastal goods; and goods transported through inland water service 65(105)(zzzzl)Should not be allowed in case for personal use of employeesShould be allowed for business use
64
Transport of goods by air service 65(105)(zzn)Should not be allowed in case for personal use of employeesShould be allowed for business use
65
Transport of goods by rail service 65(105)(zzzp)Should not be allowed in case for personal use of employeesShould be allowed for business use
66
Transport of goods by road service 65(105)(zzp)Should not be allowed in case for personal use of employees
67
Transport of passengers by air service
65(105)(zzzo)
Should not be allowed in case for personal use of employees.Should be allowed for business use
68
Travel agent’s service 65(105)(zzx)Should not be allowed in case for personal use of employees.Should be allowed for business use
good presentation and coverage. Very useful for small business and new professsionals thanks