Time Limit for claiming refund under Notification 41/2007 ST dated 6.10.2007 - Please clarify clarification

Dear Sir,

The Notn. No.41/2007 has really become a helm of affairs for the exporters since the procedures are practically not workable in any manner and the notifications and circular are poorly drafted which leads to confusion and confusion but no relief, why don’t the department simply provide a blanket exemption for Service Tax used for export of goods and services.

If a careful reading is made to the original Notn. No.41/2007 the clause (f) i.e.“exemption or refund of service tax paid on the specified services used for exports of the said goods shall not be claimed except under this notification”. It directly provides for exemption from service tax as the word used in the notn is “OR”. So the option is open to the exporter either to avail the exemption or refund as required. But the question is will the Department allow the exemption? the answer to it is NO for the simple reason that the Revenue Dept wants to make good their targets by collecting the revenue and when the exporters applies for refund simply reject it so their kitty would not be affected as it appears that the department wants to simply enjoy on these hard earned exporters sales.

Now after the recent changes in the BUDGET the department had issued 2 new notifications no.17/2009 and 18/2009 for refund and exemption respectively, but a careful analysis shows that these 2 notifications vis-à-vis the old notification would still not save the exporter. Eg

As we are all well aware that under RBI regulations the max permissible limit for DA bills under LC is 180 days, now the question here arises that if the exporter had exported the goods under LC with DA 180 days from BL and on such exports if the exporter is suppose to pay commission to the overseas agents, what would happen – say if the exporter had exported the goods in Mar’08 then –

The claim for service Tax refund should be submitted by the end of Sept’08, whereas the realization of the export proceeds against these exports would be due in Sept’08, hence only after receipt of the export proceeds the overseas agent wld be liable to claim his commission and accordingly the Indian exporter would pay the service tax after realization of the proceeds on reverse charge method.

Now the BIG question is can the refund for the service tax paid in Oct’08 for commission agents after receipt of the export proceeds in Sept’08 be allowed? The department would simply reject it saying time barred at the same time CENVAT credit would not be allowed. So the only option left over with the exporter is claim under the new Notn. 17/2009, but here also the exporter would not be able to do much for the simple reason that the Department has not included the said specified service in the refund notn. No.17/2009 in regard to commission paid to overseas agents.
Hence the exporter has to simply forget the tax paid to the department and charge it to the revenue account as an expense, and the department would enjoy the tax paid by these exporters who are fighting and begging to export goods in the current situation. But end of the day exporters have no choice since the mechanism is so poorly administered in the north block that no relief for these issue would come.

Vijay Vora 20/08/2009

 

My dear,

Do you think the government will be able to make individual rules for each and every exporter in this country to suit their convenience. Your grievance sounds as much to me.

If you decide to pay the commission to your service provider (commission agent) who assisted you in finding buyers outside India only after you receive the export proceeds based on the credit lines you allow to your purchasers abroad, then it is an individual problem. If you want to get refund of service tax then you have to resolve your problem of payment of commission to the commission agent within time even if you don't receive the export proceeds.

If you want the government to sanction your refund claim then you should have paid the commission to the commission agent and the service tax thereon (by reverse charge) within the time frame fixed by the notification.

How can we expect the government to make rules for the convenience of every individual?

santosh hatwar 20/08/2009

 

My dear sir,

We hv not asked the government to make individual rules, fyi 1 of the important criteria for refund is receipt of export proceeds, which fact may pls be noted. Nevertheless fyi NO exporter in India wld pay the service tax on reverse charge without the receipt of the export proceeds, since the commission agents basic job is to procurr the order and realise the money for the seller which is the basic and prime responsibility of any agent for which he has been paid. Do u think just by getting an export order the seller shld discharge the service tax liabilities for the commission agent. fyi the said service is also related to business activity and cenvat credit is available but it wld only be allowed by the Tribunal or the HC/SC which fact is very well none to the Government, but still the regulations are not streamlined and due to which litigation is on and the money of the exporters are blocked for a long time to get the relief. Any regulation to be imposed shld be simple and fast to effectively be implemented and monitored, but here is a rule where all duties and taxes are exempted for exports except for service tax which first needs to be paid and then refunded, does the government really mean to provide the refund the answer is no, the reasons are well known to you why NO.

Vijay Vora 20/08/2009