Budget: Service Tax Exemption Notifications - An overview

By TIOL News Service

NEW DELHI, JULY 07, 2009: NOTIFICATION no 17/2009-ST - None other than the FM himself in his budget speech has admitted that the service tax exemption notification (refund) notification 41/2007 that failed to serve the intended purpose. Though a number of attempts were made by the Board to ensure hassle free refunds to the exporters, the desired objective was not achieved. As a natural consequence, the notification has been rescinded and in its place, another Notification No 17/2009-ST which is more simplified version of earlier notification has been issued. Most of the conditions enumerated against each of the service in the earlier notification have been dispensed with and present exemption (refund) notification do not prescribe elaborate conditions against each of service for which refund can be  claimed.

The refund can now be filed with in one year from the date of export (the disputes surrounding “filing of refund claim once in a quarter’ in the earlier notification is thus removed).

If the claim is for an amount less than 0.25% of FOB value of exports and if the firm is registered with export promotion council the documents to be attached with refund claim are made simple. In cases where the amount sought for is more than 0.25% of FOB certificate from chartered accountant who audits the firms accounts.

Notification No. 18/2009-ST : Provides for exemption to GTA service and Commission Agent service ( BAS ) form service tax if these services are received by exporter and used in relation to export of goods. Earlier even for these services also the exporter was required to file refund claim (under Notification No.41/2007-ST). Now for GTA services the exporter has two options - he can either claim refund under notification no 17/2009 or claim exemption under Notification No. 18/2009. However, the conditions attached for claiming exemption to commission paid- the commission paid is to be declared in the shipping bill, the exemption is restricted to 1% of FOB value- are appears to be little harsh.

Notification No. 19/2009-ST: this notification seeks to exempts inter bank foreign exchange transactions which are liable for service tax under Banking and Financial services have been totally exempted from service tax. The government is likely to lose major chunk of revenue yielding from this service.

Notification No. 20/2009-ST: Services provided by a tour operator having a contract carriage permit and providing services of  inter-state or intrastate transportation of passengers has been exempted from service tax. However, services provided in relation to tourism, conducted tours, charter or hire service, are out of purview of this exemption notification.

Notification No. 16/2009-ST: Exempts club or association service provided by certain export promotion councils/associations to its members.