Refund of Service Tax Credit

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Santosh B Karangutkar (Querist)
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04 June 2009 With reference to the above subject, we are supplier of SEZ area, and we are taken credit of the service taxes which has been on Custom Clearing, freight forwarder, transportation, site support and assistance, security service of the company, courier charges, Rent, Telecom, Manpower supply, space controls.

Kindly arrange to suggest whether we can able to claim for the refund from the above credits, or suggest which credits we can able to claim for the refund.

Sumit gupta

Sumit gupta (Expert)
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04 June 2009 A new notification no. 15/2009 dated 20.05.2009 has been introduced. This notification amends an earlier notification no. 9/2009 dated 3.03.2009. I have given below the text of both the notifications.

In a nutshell the changes are as follows:

1. Prior to introduction of 9/2009 – all SEZ developers and units were fully exempted from paying any service tax on their input services – hence all service providers providing services to SEZ persons were not collecting any Service tax from them.

2. From 3.03.2009 the above blanket exemption was turned on its head and a new refund based exemption was introduced whereby every one providing services to SEZ persons were asked to collect and pay the taxes and the SEZ units had then to apply for refund of same. Obviously this raised the eyebrows of the powerful SEZ sector and they cried foul of the scheme. Due to elections the government could not make any changes even though it had asked the election commission to allow it to scale down the said refund scheme.

3. Now the elections are over and the government has scaled the scheme significantly in favour of the SEZ’s. The new notification makes a distinction between the following:

a. Services consumed wholly within the SEZ – Blanket exemption as earlier is again restored in these kinds of input services.

b. Services consumed partly outside and partly inside the SEZ – the SEZ units will have to keep applying for refund for such services.

As can be seen the government has taken the middle path because it was feared that there is big misuse of the blanket exemption as many SEZ units had domestic operations also but services of domestic operations were being billed in SEZ units for claiming exemptions. This move by the government would restore the sanctity of the exemption and logic thereof. On the other hand the SEZ’s fear the rampant corruptions levels and unnecessary delays in offering legitimate refunds.

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(Department of Revenue)

New Delhi, the May 20, 2009.

Notification No. 15/2009-Service Tax

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.9/2009-Service Tax, dated the 3rd March, 2009 which was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 146(E), dated the 3rd March, 2009, namely:-

In the said notification,-

(A) in paragraph 1, in the proviso,?

the sub-paragraph (c), the following shall be substituted, namely:-

“(c) the exemption claimed by the developer or units of Special Economic Zone shall be provided by way of refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone except for services consumed wholly within the Special Economic Zone;”

(2) for sub-paragraph (d), the following shall be substituted, namely:-

“(d) the developer or units of Special Economic Zone claiming the exemption, by way of refund in accordance with clause (c), has actually paid the service tax on the specified services;”

(3) after sub-paragraph (f), the following sub-paragraph shall be inserted, namely:-

“(g) the developer or unit of a Special Economic Zone shall maintain proper account of receipt and utilisation of the taxable services for which exemption is claimed.”

(B) in paragraph 2, for the words, “shall be subject to the following conditions”, the words, “ ,except for services consumed wholly within the Special Economic Zone, shall be subject to the following conditions” shall be substituted.

[F.No.354/163/ 2006-TRU]

(SUMIT GUPTA)

Under Secretary to the Government of India

Note. - The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 146(E), dated the 3rd March, 2009