Service tax cenvat facility on exports services

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Kumar

Finance Manager

38 Points Posted on 16 October 2013

Dear Experts and Seniors,

Request you all kindly impart your knowledge for availing Service tax input credit in the following:-

We are into service sector (Software services) and we have been charging Service Tax @ 12.36% to our clients and remitting to Govt on our Domestic services.

Further, we have Exports services which are exempted from Service Tax, hence we are not charging to our overseas clients. Furthermore, we were charging Service Tax on Rent, Consultancy and other services by our vendors. In this connection, request you all kindly let me know whether we are entitle to avail service tax input credit (CENVAT) facility ? As our Service Tax Input is in sizable amount.

Moreover, we understand that if we want to avail CENVAT, we need to pay @ 6% ST on our exempted services which are export services. After our through calculations if we avail CENVAT by paying ST @ 6 % on exempted services (Exports) really it would help us to increase our cash flows significantly.

As we are not aware about the same till date we have not utilized the input credit. Therefore, we request you all kindly give your valuable views whether we can avail the service tax input credit (CENVAT) as per statutory norms?

Your kind support in this regard would be highly appreciated.

Thanks in advance,

Kumar

Replies (2)

Saurabh Maheshwari

B.com ACA

4340 Points Posted on 16 October 2013

Export of Service is not an exempted service, because exempted services means those services which are taxable but specifically exempted under Notifications issued u/s 93 of Finance Act,1994

But export of service is totally out of ST net and thus not even a service ...

So no need to reverse Cenvat credit u/Rule 6(3) of CCR,2004...

Dipjyoti Majumdar

CA in service & CS. dipmaj@

2878 Points Posted on 20 October 2013

Kumar,

Further to Saurabh's observation, as he has rightly pointed out, export of service is a non taxable service. It is not an exempted service. For your case, you should avail cenvat credit on input services and utilise the same towards tax payable on domestic invoicing. Any balance may be claimed as refund.

However, claiming refund is a complicated process and there are various factors involved like : date of raising of export invoice, date of receipt of export proceeds through international banking channels and date of payment of service tax to your service providers on input services.

Hence it is better to accumulate cenvat credit in books and ST3. There is no need to pay 6% tax on export billing. Please revert if your query is answered satisfactorily.

Thanks,