The Hindu Business Line : Tax on input services

Will rebate be allowed on service tax paid in input services used in manufacture of goods or rendering of taxable services which are later exported out of India?

R. Satish, email

Yes. The Finance Act, 2006 has inserted a new Section 93A to provide for rebate of service tax paid on taxable services used as input services for manufacture or processing of goods or for providing taxable services meant for exports.

The Central Government shall grant rebate to the extent allowed under the rules.

Section 93 provides for grant of rebate of service tax paid subject to fulfilment of the following conditions:

Goods and services should be exported in relation to which rebate is being sought.

Goods must be excisable goods and services must be taxable services.

Rebate shall be granted for service tax paid on taxable services (not excise duty).

Taxable services on which rebate is granted shall be one which are used as input services for (a) manufacturing or processing of goods, or (b) providing any taxable services.

Sale proceeds in respect of goods or consideration in respect of services should be received by or on behalf of exporter in India within the time allowed by the Reserve Bank of India (under Section 8 of FEMA, 1999).

If payment as aforesaid is not received, then it will be deemed that such rebate was never allowed and the Central Government may recover or adjust such rebate. The rebate under Section 93A shall be subject to prescribed rules and manner as may be notified under Clause (hh) of sub-section (1) of Section 94 of the Finance Act, 1994.

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Sanjiv Agarwal

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