Recent changes for exim traders

This year's Finance Bill has a proposal for giving retrospective effect to the amendment of a notification granting a tax rebate on services used for export after clearance of goods from the place of removal.

The Bill also proposes to remove from the negative list any services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the Customs station of clearance here. These changes will have implications for both exporters and importers.

Notification 41/2012-ST, dated the June 29, 2012, gives the exporter an option to claim the rebate (by way of refund) either on the basis of what is specified in the annexed schedule of rates or on the basis of documents as specified in the procedure. The notification allowed claim of refund of the actual tax on services used beyond the place of removal, for the export of goods on the basis of the documents.

It is this notification that was amended by another dated February 3 this year, 1/2016-ST.

The latter allows refund of tax on services used beyond the factory or any other place or premises of production or manufacture of goods for export of the said goods.

And, to increase the refund amount commensurate to the increased service tax rate.

Clause 157 of the Bill proposes to give retrospective effect to that amendment from the date of application of the parent one, i.e from July 1, 2012. A month's period from the date of enactment of the Bill is proposed to be allowed to exporters whose claims of refund were earlier rejected in the absence of this amendment. This change will help exporters.

The entry at Section 66D(p)(ii) of the Finance Act, 1994, places services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the Customs station of clearance in the negative list.

Clause 146 of the present Finance Bill proposes to be omit that entry with effect from June 1 this year. Which means such services will become taxable from this date.

However such services by an aircraft will be exempted, by way of an exemption notification, 09/2016-ST, dated March 1. However, services by way of transportation of goods by a vessel from a place outside India up to the Customs station of clearance will get taxed.

Shipping lines registered in India will pay service tax under forward charge, while the services availed from a foreign shipping line by a business entity located in India will get taxed under reverse charge at the hands of the latter.

This is an additional cost for importers but the service tax so paid will be available as credit with the Indian manufacturer or service provider availing such services (subject to fulfilment of other existing conditions).

However, traders who import will have to bear the additional cost. The service tax levied on such services shall not be part of value for Customs duty purposes.

Exporters and importers should take note of these changes.
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