Pending Service Tax Refund - 1000 Crore

Even as the government steps up efforts to stimulate flagging exports, more than Rs 1,000 crore in refund claims to services exporters are believed to be pending with the Services Tax Commissionerate in various parts of the country. There are 104 services that form a part of the export status category, including banking and financial services, insurance, telecom and supporting businesses, such as BPOs and KPOs. The sticking point, according to services exporters, is a condition that puts the onus on the exporter to prove that the services executed in India are used outside the country to claim a refund on input services. In Delhi, for instance, exporters are asked to establish the export nature of their transactions. The other common reason for claims being withheld is non-submission of documents like foreign inward remittance certificate — which details that convertible foreign currency has been remitted from overseas and has to be acquired from the bank in which the exporter has an account. Exporters maintain that while on the one hand the government has issued clarifications directing its officers to sanction 80% of the refund amount within 15 days of filing of the claim, notices were issued to recover the same refund granted along with interest under the above procedure. There are several instances, they said, where the local officer has passed the claim and the pre-audit wing within the department sits on it for a number of days and then, just to suppress its inefficiency, generates a query to return the file back to the local officer. “The sheer size of refunds scares the tax officer to take upon himself the onus of sanctioning refund claims. He then finds excuses to pass the buck to a higher forum by rejecting the claim, which in turn results in exporters’ funds being locked up and undue litigation cost and time,” said an exporter with a “sizeable” refund claim. “Fortunately,” added the exporter, “the principle of export is by and large settled by the courts and, hence, the objections earlier being raised on proving export status are diminishing, though in certain jurisdictions these objections are taking new form and shape.” Even as services exporters now look up to the finance ministry to get a tax refund on inputs for providing such services, Gautam Bhattacharya, commissioner (service tax), Central Board of Excise and Customs (CBEC), said he hadn’t been approached so far with any problems related to procedural issues. “I would like any affected party to come up and make a representation to me if there has been an issue. So far, there has been a representation by services exporters in respect of the condition that puts the onus on exporters to prove their services performed here were used outside the country. I haven’t come across any problem of a procedural nature,” said Mr Bhattacharya. When contacted, Sachin Menon, executive director, indirect tax, PricewaterhouseCoopers, said the need of the hour was to “fix” personal accountability on officers and to follow judicial discipline in allowing credits based on court rulings. He added that while the service tax commissioner in Mumbai has done a commendable job in personally taking an initiative and issuing a diktat to his officers to process refund claims on a priority basis, the results were yet to be seen.