TMI BlogDraft Circular on Refunds in Service TaxX X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for refund under notification 05/2006. Resultantly, the issue has spawned delays and disputes, which has necessitated the issue of this clarification. 2. The issue of eligibility of input services to refund under notification no. 05/2006 has been addressed in Circular No. 120/01/2010-ST dated 19th January, 2010 in paragraph 3.1. The criterion laid down in this paragraph for determining the eligibility states that in case the absence of such input/input service adversely impacts the quality and efficiency of the provision of service exported, it should be considered as eligible input or input service . This criterion has not been very useful as it is found to be too conceptual and not easily translatable into objective tests that could help in deciding actual cases. Thus a need has been felt for further elaboration by the Board on this issue. 3. The objective that is sought to be achieved by the refund of cenvat credit under notification 05/2006 is to zero-rate the exports. Zero-rating means that the goods and services that are exported from the country should not be burdened with any excise or service taxation. For a 100% exporter who has no domestic business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in identifying and linking the input services that have gone into providing the output services. Accordingly, the method to be followed for determining eligibility to refund can be summed up in the following principles: (1) Check that the service on which refund is claimed satisfies the definition of input service that is given in Rule 2 (l) of the CENVAT Credit Rules, 2004. (2) Next, service is eligible to refund unless facts of the case indicate that the benefit of the service has gone exclusively into domestic business with no spill over what-so-ever into export business. (3) The second principle mentioned at sub-para (2) above is to be given a strict construction. Disqualification on this account would be an exception rather than a rule and should be done only when there is unmistakable indication that the benefit of the service has not gone into export business what-so-ever. (4) The level at which a determination shall be made of whether the input service has gone exclusively into domestic business or not shall be at the level of the input service invoice‟. The officer scrutinizing the claim will not disaggregate the invoice and extract elements from it and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... professional objectives. Hence it is an eligible input service for exporting the taxable output service. These services are required for travel and tour of their employees in relation to the company s business which are essential for maintain orders and efficient work of the business i.e. export of services. 3 Asset management service 65(105)(zzzzc) Should not be allowed in case for personal use of employees. May be allowed when used for Banking and other financial services. 4 Banking and other financial services 65(105)(zm) (zzk) Should not be allowed in case for personal use of employees. These input services are required for issuance of bank guarantee for overseas project / other business activities. 5. Business auxiliary services 65(105)(zzb) These input services are required for procurement of orders and some similar activities. 6. Business exhibition services 65(105)(zzo) These services would be required for furtherance of business activities. 7. Business support services 65(105)(zzzq) Accounting payroll, transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be allowed in case for personal use of employees Should be allowed as these are used for professional activities. 17 Cost accountant's services 65(105)(t) Should not be allowed in case for personal use of employees Should be allowed as these are used for professional activities. 18 Courier service 65(105)(f) Should not be allowed in case for personal use of employees. These services are consumed by a Company for delivery of business documents. The delivery of these documents is essential to process transactions related to exports. Hence, a valid service. 19 Credit rating agencies 65(105)(x) These services are used for professional purposes. 20 Custom house agent's services 65(105)(h) These services are used for professional purposes in relation to exports. 21 Design services 65(105)(zzzzd) These services are required for making designing of consumer products, industrial products, packages, logos, graphics, website and corporate identity designing and production of three dimensional models. Without these services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Should be used only for office purposes. 32 Interior decorator's services 65(105)(q) Should be allowed if used for renovation or maintenance of office premises only. 33 Internet telecommunication services 65(105)(zzzu) A company uses the telecommunication /internet telecommunication services which are essential input services for providing output services. These input services are consumed essentially for providing the output services related to the export business and for discharging day to day duties by the administrative staff. Without the telephone and internet facility the services could not have been rendered. 34 Legal consultancy service 65(105)(zzzzm) Should not be allowed in case for personal use of employees. Should be used only for office purposes. 35 Management or Business consultant's services 65(105) Consultancy Services are procured for providing advice, consultancy and technical assistance in relation to the business and therefore should be allowed. 36 Management, maintenance or repair service 65(105)(z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations, professionals are hired in maintaining relations with govt. authorities and organizations. Should be allowed 46 Rail travel agent's services 65(105)(zz) Should not be allowed in case for personal use of employees. Should be allowed for business use. 47 Real estate agent's services 65(105)(v) Should not be allowed in case for personal use of employees. Should be allowed for business use. 48. Rent a cab service 65(105)(o) It is not allowed in so far as it relates to a motor vehicle except when used for provision of a taxable service for which credit on motor vehicle is available as capital goods. 49 Renting of immovable property services 65(105)(zzzz) The premises from where the party renders output services or premises where books of accounts of company are maintained has been taken on rent and accordingly renting of immovable property is essential for operation for the output service. 50 Sale of space or time for advertisement services 65(105)(zzzm) Should be allowed for business use. 51 Scientific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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