Panel to review service tax refund for exports

The finance ministry has formed a committee to review the scheme for electronic refund of service tax paid on taxable services used for export of goods. This follows a two percentage points increase in service tax and introduction of a ‘negative list’ for taxation in the sector.

The committee is to suggest a scientific approach for fixing the schedule of rates for service tax refund and propose a revised schedule of rates for refunds, taking into account the recent revision from 10 per cent to 12 per cent and movement towards a ‘negative list’ approach, the ministry said.

The panel is to be headed by the director general of service tax, Sanghamitra Panda, and is to give its report to the Central Board of Excise & Customs (CBEC) chairman by June 20. Others on the committee are Sushil Solanki, commissioner of service tax in Mumbai, and J M Kennedy, director in the tax research unit of the CBEC.

It may interact with or call for data from field formations, export promotion councils, chambers of commerce or any other business or industry association, as may be required. The Special Economic Zones Act of 2005 provides exemption from service tax on taxable “services provided to a developer or unit” to carry on authorised operations in an SEZ. This was in contrast to a service tax notification in 2004 which said exemption would be provided for taxable “services received for consumption within the SEZ”. The SEZ Act, however, had overriding effect on any other law.

The ministry issued another notification in March 2009 to provide refund of service tax paid on taxable services, whether or not these were provided inside the SEZ. It issued another notification in May 2009 to amend the earlier notification and dispensed with the requirement of first paying the tax and then claiming the refund for services consumed within the SEZ. For taxable services consumed partially or wholly outside SEZ, it said the exemption would be given by way of refund.