Under the Export Promotion Capital Goods (EPCG) scheme, can we use exports of one company to discharge the export obligation of another company? If so, what are the conditions?
As per Para 5.5 (i) of the Foreign Trade Policy (FTP), up to 50 per cent of the export obligation may be fulfilled by exports of other good(s) manufactured or service(s) provided by the same firm/company, or group company/managed hotel, which has the EPCG authorisation. So, you can use the exports of a group company but not any other company. However, in such cases, additional export obligation imposed shall be over and above average exports achieved by the unit/company/group company/managed hotel in the preceding three years for both the original and the substitute product(s)/service(s), despite exemptions in Para 5.7.6 of the Handbook of Procedures (HBP v1). EPCG authorisation issued prior to 1.4.2008 will be governed by earlier policy provisions. For definition of Group Company, you may refer to Para 9.28 of the FTP.
I am working in one of the leading Regional Television Channels. We have made certain payments in foreign exchange as carriage fee for the distribution of our channel in the UAE and USA. Recently, CERA Audit in their audit enquiry has pointed out that since these service providers are not having any office in India, we being a recipient of services, are liable to pay service tax on the payments made by us. Since such service is used as input to providing taxable output, the service tax paid as such service can be taken as input for providing any taxable output, the service tax paid on such service can be taken as input credit. Can you confirm whether the CERA audit is valid?
In terms of Section 66A of the Finance Act, 1994, any taxable service provided from outside India to a service recipient in India shall be treated as if the recipient had himself provided the service, subject to certain exceptions and conditions. In such cases, as per sub-rule (iii) of Rule 3 (in your case) read with Rule 4 of Taxation of Services (Provided from India and Received in India) Rules, 2007, the service recipient has to discharge the tax liability. It is an input service in your case. However, Rule 3 (1) of the Cenvat Credit Rules, 2004 does not specifically mention service tax paid under Section 66A of the Finance Act, 1994 for the purpose of taking Cenvat Credit. Rule 3(1)(ix) of the said Rules mentions only the service tax paid under Section 66 of the said Act. So, there have been some audit objections on that count. So, I am of the view that you must represent the matter to the Government for necessary amendment.
Are we required to reverse proportionate Cenvat Credit, in the case of a trade discount given subsequently?
As per CBEC Circular no. 77/15/2008-CX dated 17.11.2008, Credit taken on the basis of invoice need not be reversed, if the duty paid is not reduced or claimed as refund by supplier
