Notfn 41/2012-ST - Refund procedure of ST paid on Input Service
MAY 17, 2013
By Ankit Kanodia, CA
IN the pre-negative list regime as introduced w.e.f. 01.07.2012, the process of claiming refund of service tax paid on specified services by merchant exporters and manufacturer exporter of goods was governed by Notification No. 52/2011-ST dated 30.12.2011. In the new regime, the said notification has been superseded by Notification No. 41/2012-ST dated 29.06.2012 w.e.f. 01.07.2012. Therefore, henceforth any claim of refund/rebate of service tax paid on input services used by merchant exporters and manufacturer exporter of goods would be governed by the clauses of Notification No. 41/2012-ST. The salient features of the same are given below.
2. DATE OF APPLICABILITY
The process under the new notification is to be followed for refunds beginning from July 1, 2012.
3. SPECIFIED SERVICES ELIGIBLE FOR REFUND
Since, w.e.f. 01.07.2012, service specific classification of services have been done away with and we have a single consolidated definition of the term "service" as defined under Section 65 B(44) of the Finance Act, 1994 as amended to date, the Notification lists down the definition of specified services for which refund can be claimed on the basis of services used beyond the place of removal as eligible services for claiming refund of input service credit.
The extract of the relevant portion of the aforesaid notification is reproduced below:
"(i) In the case of excisable goods, taxable services that have been used beyond the place of removal, for the export of said goods;
(ii) in the case of goods other than (i) above, taxable services used for the export of said goods;
But shall not include any service mentioned in sub clause (A),(B),(BA) and (C) of clause (I) of rule (2) of the CENVAT Credit Rules,2004."
From the reading of the above clause it is clear that the following are eligible input services for claiming refund under the said notification:
+ All the services used beyond the place of removal other than those specific excluded from the definition of input service under Rule 2(l) of the Cenvat Credit rules, 2004 as amended to date.
The services which form part of the exclusion clause of the definition are:
| a. Construction of Complex services | |
| b. Works contract service | |
| c. Rent a cab operator service | |
| d. General insurance service in relation to motor vehicle | |
| e. Motor vehicle related services | |
| f. Outdoor catering services | When used primarily for personal use or consumption of any employee |
| g. Beauty treatment services |
| h. Health services |
| i. Cosmetic and plastic surgery services |
| j. Membership of a club services |
| k. Health and fitness centre services |
| l. Life insurance |
| m. Health insurance |
| n. Travel benefit extended to employee on vacation |
Now, the services which can be claimed as eligible services and used beyond the place of removal are:
a. Clearing and forwarding agents services
b. Courier services
c. Custom house agents services
d. Insurance business services in relation to General Insurance
e. Port services
f. Storage and warehousing services
g. Transport of coastal goods and transport of goods through national water way/inland water services
h. Transport of goods by air services
i. Transport of goods by road services
j. Terminal handling services
k. Technical testing and analysis
l. Technical inspection and certification services
m. Cleaning activity services
n. Banking and other financial services
o. Foreign exchange broking services
p. Airport services
NOTE: In the earlier regime, the services eligible for claim of refund were stipulated with certain conditions. But in the new regime the same has been done away with as there is no service specific classification prevailing under the law. However, it is advisable to follow to the extent possible all the conditions as were contained in the erstwhile regime as the same may be litigated by the department at the time of giving the refund.
4. PLACE OF REMOVAL
Rebate of input service tax is allowed for services used beyond the place of removal. The definition of place of removal is contained in section 4 of Central Excise Act 1944.
"Place of removal means -
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without [payment of duty;]
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;
from where such goods are removed;"
Therefore, all services which are utilised beyond the place of removal are eligible to be claimed as input credit.
One has to check in every case the meaning of place of removal in order to be eligible for refund of tax paid.
5. PROCEDURE FOR CLAIMING REFUND
Under the new notification, two procedures have been specified for claiming the refund of service tax. The first process allows rebate of service tax paid on eligible input services as a percentage value of the declared Free on Board (FOB) value of the export goods on the basis of rate specified in the schedule. The other procedure for rebate is the same as the procedure specified under earlier notification with minor changes.
6. Maximum amount of rebate allowed
The rebate under the procedure on the basis of documents shall not be claimed wherever the difference between the amount of rebate under the procedure of rebate as a percentage on FOB value of goods and rebate on the basis of documents is less than twenty per cent of the rebate available under the procedure of rebate as a percentage on FOB value of goods.
7. Time period for department to refund the amount
The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise shall refund the service tax paid on the specified service within a period of one month from the receipt of said claim if he is satisfied that all the procedures as laid down in the notification have been complied with and that no refund has not been already received on the shipping bills or bills of export on the basis of procedure described in the notification.
8. Time period for bringing foreign exchange currency in India
Where any rebate of service tax paid on the specified services has been allowed to an exporter on export of goods but the sale proceeds in respect of said goods are not received by or on behalf of the exporter, in India, within the period allowed by the Reserve Bank of India under section 8 of the Foreign Exchange Management Act, 1999 including any extension of such period, such rebate shall be deemed never to have been allowed and may be recovered under the provisions of the said Act and the rules made thereunder.
It is hoped that the above modalities if followed scrupulously by merchant exporters and manufacturer exporter of goods, there is little chance of their refund/rebate of service tax paid on input services being denied by the department.
(The views expressed are strictly personal and based on the author's understanding of the law.)
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