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ER -2 : Applicable to STPI Unit ?

chamatkaribaba (Practicing Indirect Tax) (97 Points)

30 May 2011

Should STPI Unit providing software services file ER - 2? Please share your inputs.

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9 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 30 May 2011

if they clear their products as goods then only ER2, if cleared as services then service tax return is applicable,

in such cases where no goods are cleared / to be clreared, then no need to obtain excise registration, and file returns

chamatkaribaba (Practicing Indirect Tax) (97 Points)
Replied 30 May 2011

Thank You Sharma Ji. But, One of our clients who is providing services has received a notice to submit ER-2. What should we do?

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 31 May 2011

softwares are catagorized in both, 1) excise 2) service tax,

if they clear softwares as goods then ER-2 applicable, if they clear as service then servicetax return

if they hold excise registration then they have to file ER2 as NIL return, and cancell the registration asap.

if they dont have registration, then reply to notice that since we are not manufacturing / clearing excisable goods, we are not liable to file excise returns.

chamatkaribaba (Practicing Indirect Tax) (97 Points)
Replied 31 May 2011

Our client does not have excise registration. They are totally into software services. We are thinking to file ER 2 with all NIL details and without mentioning excise registration since we do not have it. WE are STPI. So, will be mentioning LOP Number. Ur Comments?

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 31 May 2011

once filed you will get entitled to registration,

reply to notice with respective facts stating that you are not liable to file excise returns as your activities does not amount to manufacture.

I assume that at some place the assesee has cleared the software as goods in place of services, and that would be basis of the claim of excise department to ask you for ER2 returns.

chamatkaribaba (Practicing Indirect Tax) (97 Points)
Replied 31 May 2011

No, We have never claimed it as goods at any point of time. We are filing ST-3 returns. Major 90% amount of revenue is from exports for that we are filing refund of cenvat claims. On rest 10%, we have paid service tax.

We have VAT registration but filing NIL Returns. We are getting SCN from VAT Department and we are litigating before various forums that we are not liable to pay VAT.

Now, we got notice to file ER-2.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 31 May 2011

visit your stpi commissioner and clear the issue with him, he will issue necessary instructions to concerned in your favor to resolve the issue,

as stpi commissioner is governing the issues related to stpi, he is the authority to countersign your submissions to concerned departments.

Regarding VAT, its applicable on DTA sales of softwares, irrespective of facts that it fall under excise or service tax, in both the cases DTA sales will attract vat.

chamatkaribaba (Practicing Indirect Tax) (97 Points)
Replied 31 May 2011

The Office of Excise is not bound by what STPI says. We have enough document from STPI to say that we are in the business of software services.

Regarding VAT, VAT is applicable on goods and not on services. There can not be both VAT and Service Tax on the same transactions.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 31 May 2011

VAT rules are not bound with Excise or service tax, VAT is state Govt taxes, while Excise / Service tax is central govt tax.

Numbers of items are in practice where vat + service tax both are applicable, viz outdoor catering, works contract, software services, construction ...........

regarding ER2, my opinion is to reply the excise department with your submission, and request for a personal hearing where you can be in position to clarify your submission for not being classified under excise.