Press Note : Simplified Scheme For The Refund of Service Tax

An announcement was made by Hon’ble Finance Minister in the Budget Speech 2011 for introducing a simplified scheme for the refund of service tax paid on services used for export of goods on the lines of drawback of duties.

To implement the simplified scheme, the Government has issued notification No. 52/2011 – Service Tax effective 3rd January 2012 that will provide average rates of service tax refund, ranging from 0.03% to 0.20% of the F.O.B. value of export, for a wide range of goods exported from India. The average rate of refund is in respect of 18 identified services used beyond the factory gate.

As in the case of payment of duty drawback, the service tax refund will be enabled by the Indian Customs EDI System resulting in the amounts getting directly credited into the exporters’ bank accounts within a few days of confirmation of export without additional export documentation. Customs Officers have separately been vested with powers of Central Excise/Service Tax Officers for this purpose.

The scheme adds to the e-enabled service delivery to exporting community, limits public interface as well as reduces transaction costs in obtaining refunds.

www.cbec.gov.in

Online Service Tax Refund of Tax on 18 Services

As exports face adverse conditions amid a slowdown in growth, the government today came out with a mechanism to provide online refunds of tax paid on 18 services used beyond factory gate for outbound shipment of goods. Upbeat exporters exuded confidence that they can tackle the difficult situation ahead in the current calendar year, if the government continues to be proactive in supporting their cause.

Earlier, the Central Board of Excise and Customs (CBEC) issued a notification to provide average rates of service tax refund, ranging from 0.03 per cent to 0.20 per cent of the freight-on-board value of exports. This average rate of refund is in respect of 18 services used beyond the factory gate like those provided by an insurer, transporters from inland container depots to ports and by ports among others. The finance ministry said service tax refund would be credited to the accounts of exporters directly.

“As in the case of payment of duty drawback, the service tax refund will be enabled by the Indian customs electronic data interchange (EDI) system resulting in the amounts getting directly credited into the exporters’ bank accounts within a few days of confirmation of export without additional export documentation,” the statement added.
Customs officers have separately been vested with powers of central excise and service tax for this purpose. A proposal to this effect was part of Finance Minister Pranab Mukherjee’s Budget speech for this fiscal. The ministry had said the scheme limits public interface as well as reduces transaction costs in obtaining refunds.
The Federation of Indian Export Organisations said refunds through EDI would save both transaction time and costs, as there will be no requirement of application. “There will be reduced documentations once the facility to track status online will be available,” its president Ramu S Deora noted.

He said the government’s continued proactive measures would facilitate exporters to sail through in 2012, when they look set to face numerous challenges.

The idea was first mooted by the committee that was formed under minister of state for commerce and industry Jyotiraditya Scindia in December 2009 with the aim of reducing the transaction cost by 10 per cent of the export value.

Currently, the duty drawback is directly credited to accounts of exporters maintained
at customs houses, but exporters have to file claims separately to get service tax refunds. This leads to severe delays in refund and loss of time, as it entails a plethora of complex paperwork.

Facing external adverse conditions, India’s merchandise exports grew just 3.9 per cent in November 2011-12 year-on-year, against a whopping up to 80 per cent rise in the earlier months of this fiscal. Exports reached only 192.7 billion dollars in the first eight months, prompting experts to disbelieve the prospect of meeting a target of $300 billion set for the current financial year.

Business Standard, New Delhi, 04-01-2012

Exporters to Get E-Refund of Tax Paid on Input Services

Reliance Industries, Bharat Forge, Bajaj Auto and other exporters will now be able to receive electronic refund of service tax they pay on input services used by them in goods exported. The finance ministry has unveiled a new scheme to refund service tax to exporters on the lines of duty drawback scheme for tangible imports used to produce goods. The scheme will help the exporter to get the refund in simpler and quicker way, said SK Goel, chairman, Central Board of Excise and Customs. The fixed rate of refund would range from 0.03% to 0.20% of the freight on board value of export for a wide range of goods exported from India. The average rate of refund is in respect of 18 identified services used beyond the factory gate. Services eligible for tax refund include banking and other financial services, port services, transport of goods by road and railways, general insurance, technical testing and analysis, storage and warehousing, business exhibition services and specialised cleaning services. The scheme, similar to duty drawback scheme, was announced by finance minister Pranab Mukherjee in his Budget speech 2011.It is based on the architecture suggested by the panel headed by the Planning commission member Saumitra Chaudhury. Service tax refund has been a big issue with the industry with hundreds of crores locked up in refunds. Though the finance ministry has made several attempts to make service tax refund less cumbersome and faster, but the efforts have failed to satisfy the industry. Exporters body FIEO and other industry bodies have given several representations to the government seeking a simpler system for refund of service tax. A committee appointed by the department of commerce to look into transaction costs of exports recommended that service tax paid on input services used by exporters be refunded on the lines of duty drawback. It had pointed out that the embedded taxes and duties paid on inputs undermined the competitiveness of Indian exports. Asked about indirect taxes collections, Goel said customs collections grew by 6% in December to Rs. 12800 crore, as per provisional data. However, the growth has slackened in December compared to 19% in November, adding pressure to falling revenues of the central government.

Economic Times, New Delhi, 04-01-2012