Friday 17 July 2015

Cenvat Credit On Goods Transported For Exports

We are a limited company engaged in the manufacture of the excisable goods which are later exported by us. For the purposes of export, we avail of the services of a goods transport agency for transporting goods from the factory to the port. Accordingly, we would like to know if we are eligible for the Cenvat credit on the same.

As per the provisions of the Cenvat Credit Rules, 2004 (the Credit Rules), the Cenvat credit is available to the manufacturer for the input services procured up to the ‘place of removal’. The term place of removal has been defined under the Credit Rules to mean a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory.

Further, as per the Circular No. 999/6/2015-CX dated 28 February 2015 (the Circular), it has been clarified that in the case of a manufacturer exporter, the transfer of property in goods takes place at the port where the goods are unconditionally apportioned to the shipping line and after the issue of the let export order (LEO), it is the sole responsibility of the shipping line to ship the goods to the foreign buyer with the exporter having no control over the goods. Thus, when the LEO is issued the property in goods gets transferred from the seller to the buyer.

In the instant case, we understand that the property in goods get transferred at the port after the issuance of the LEO by the customs officer. Hence, basis the Sale of Goods Act, 1930 and the Circular the goods can be said to have been sold at the port. Accordingly, the company shall be eligible to avail of the Cenvat credit in relation to the transportation services availed of for transportation of the manufactured goods to the port.

We are a private limited company providing works contract services. Recently, we have been awarded a government contract to take up rock fall protection and slope mitigation works across a dam area. Please suggest whether we are required to pay service tax on such services provided to the government?

In terms of extant service tax laws, service tax shall be charged on the value of all services provided in India except those specified in the Negative list or otherwise exempted. Notification No. 25/2012–Service Tax dated 20 June 2012 (exemption notification) grants exemption in relation to specified services provided to government, which include services pertaining to erection, installation, maintenance, repair, renovation, alteration etc. of canal, dam or other irrigation works. We understand that the services in the instant case would not qualify as erection, installation, repair, renovation, alteration of dam and accordingly shall not be exempt from service tax.

We are consulting engineering services exporters located in a domestic tariff area (DTA). We provide such services to various clients located in SEZs. Whether for providing such services to SEZ units, we would be eligible for benefits under the recently announced Service from Export India Scheme (SEIS) under the Foreign Trade Policy (FTP) 2015-2020?

A combined reading of para 3.08 (a) with para 9.51 (i) of the FTP 2015-2020 suggests that only ‘supply’ of a service to any other country is eligible for SEIS benefits. Since an SEZ is otherwise located within the Indian territory, supply of a service by units located in DTA to SEZs should not eligible for rewards under SEIS. It may be noted that a SEZ is deemed to be located outside India only for specified purposes under the SEZ Act, and the SEIS is not covered as part of list of such specified purposes.

This position has been also been clarified by directorate general of foreign trade (DGFT) vide its Policy Circular No. 1/2015-2020 dated June 11, 2015, wherein it has been stated that regardless of the amendment notified vide Notification No. 08/2015-2020 dated 04.06.2015 (through which export turnover/supplies relating to services to SEZ units has been deleted from the list of ineligible categories under SEIS, thereby making supply of a ‘service’ from SEZ to other countries eligible for SEIS benefits), supply of a ‘service’ by units located in DTA to SEZ units was and shall continue to remain ineligible for rewards under SEIS.

Accordingly, services provided by your company to units located in SEZs would not eligible for rewards under SEIS.

Source:financialexpress.com



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