Custom Vs. Service Tax Refund

As per the provisions of Rule 5 of the Export of Services Rules’2005 service tax paid on exported taxable services or service tax paid on input service or duty paid on input would be eligible as “Rebate”. The Central Government has issued Notification No 12/2005-ST dated 19th April’2005 providing conditions, procedure and restriction in relation to Rebate mechanism.

Please noted that :-

IT companies registered with Service Tax can claim refund under couple of options namely a) Refund of unutilized CENVAT Credit under Rule 5 of the CENVAT Credit Rules’2004 vide Notification No. 5/2006-CE(NT) dated 14-03-2006 as amended and b) Rebate of service tax paid on services used for export of services under Rule 5 of the Export of Service Rules’2005 vide Notification No. 12/2005-ST dated 19-04-2005 as amended. However, it is important to mention that both these rebate and refund provisions are mutually exclusive.

IT companies NOT registered with Service Tax MAY claim rebate of service tax paid on services used for export of services under Rule 5 of the Export of Service Rules’2005. Please refer to our discussion on term “may” used for IT companies not registered with service tax hereunder.

Regards,