Serviceprovider providing both taxable & non taxable service

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 March 2010 We are KPO providing services to foreign clients and receiving payment from them in foreign covertible currencies. Now we have started to provide service for local clients as well. So, in this case we are maintaining separate books for availing input credit. We are claiming input credit for services directly atttributable for providing local services. In this case, can we claim refund of input credit relating to export of services or adjust with service tax payable?? please suggest as the due date is March....

Rajesh Kumar

Rajesh Kumar (Expert)
Follow

30 March 2010 Yes, you can claim refund of service tax on inputs service paid used in export of service.

Querist : Anonymous

Querist : Anonymous (Querist)

30 March 2010 is export of services exempt services for the purpose of Cenvat credit rule 6(3)??

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

25 July 2025 Great question! Let's clarify this with reference to the **CENVAT Credit Rules, 2004**, especially in the context of **Rule 6**, which deals with credit restriction where a service provider provides both **taxable** and **exempted** services.

---

### 🔍 **Is Export of Service an “Exempted Service”?**

Under **Rule 6(1) & 6(3)** of the CENVAT Credit Rules:

* **“Exempted Service”** is defined in **Rule 2(e)**.
* Export of service is **not considered an “exempted service”** for the purpose of **Rule 6**.

✅ **Export of services is treated as a "zero-rated" service**, not an exempted one.

---

### 💡 So, what does this mean?

* **You are NOT required to reverse or proportionately disallow CENVAT credit** on inputs/input services used for export of services.
* **You can continue to claim full credit** on input services used exclusively for export of services.
* For common input services used for both domestic taxable services and exports, **no reversal is required under Rule 6(3)** either.

---

### ✅ **Options Available to You:**

1. **Take Refund** under **Rule 5 of the CENVAT Credit Rules** (using Form A) for the input credits attributable to exported services.

* Ensure you have FIRCs, export invoices, and documentation.
* File the refund claim within **1 year** from the relevant date.

2. Alternatively, **use the input credit** against your **domestic service tax liability**.

---

### 📌 Summary:

| **Issue** | **Answer** |
| --------------------------------------- | ---------------------------------- |
| Is export of service "exempt"? | ❌ No, it’s zero-rated |
| Can you claim input credit on exports? | ✅ Yes |
| Need to reverse credit under Rule 6(3)? | ❌ No reversal required |
| Refund of input credit possible? | ✅ Yes, under Rule 5 (CENVAT Rules) |

---

If you'd like help with **drafting a refund application** or **working out the calculation format for input credit refund**, let me know!

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now