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Service Tax Exemption

The Finance Ministry of India has exempted some goods and services in the budget 2009-10 which are described below:

Sub brokers have been exempted from payment of service tax.
Transportation of passengers through contract carriage permit has been exempted.
Federation of Indian Exporters Organisation and Export promotion councils has been exempted from paying service tax on membership subscription.

The service tax exemption will be available on various sectors of Indian economy ranging from export, transportation, sez to different other categories.

The service tax exemption can be achieved on transportation of certain specified goods carried by rail or throughout inland water and coastal shipping.

For rail services, transport of defence/military equipment, railway equipment/materials, postal mail bags, luggage of train passengers, parcels (including newspapers/magazines), food grains, sugar, fertilizers, milk and milk products, fruits and vegetables and motor vehicles will be exempted from service tax.

Also, kerosene oil meant for deliver during public distribution system, petroleum products including LPG cylinders booked by public sector oil marketing companies and transported by Indian Railways will be considered for service tax exemption.

For transport of goods through inland water and coastal shipping, the exempted goods consist of edible oils, food grains, fruits, vegetables and flowers, tea and coffee, sugar, sugarcane, grocery, fertilizer, sarees, petroleum and petroleum products, raw jute and jute textile, hank yarn made from cotton, medicine and pharmaceutical products and newspapers and magazines.

All essential commodities used by Government will get service tax exemption whether the transportation of goods is made by rail or through inland water and coastal shipping.

The government will also consider cotton industry for service tax exemption and reducing interest rates on shipment credit in the Budget 2009-10.

The Finance Ministry has expanded service tax exemption to five more export promotion councils (EPCs). From now the total number of EPCs liable to get service tax exemption has increased up to 27 across the country. Budget 2009-10 had granted exemption on the service tax applicable under “club or association services” for 22 specified EPCs. Customer will avail this benefit only for the period up to March 31, 2010.

The five councils are as follows:-

Electronics and Computer Software Export Promotion Council.
Indian Oil Seeds and Produce Exporters Association (export promotion council).
Services Export Promotion Council.
Jute Manufacturers Development Council.
Wool Industry Export Promotion Council.

The Service Tax Exemption for SEZ:-

Vide the notification of The Central Government some service tax exemption are available regarding the taxable services in relation to the approved operations in a Special Economic Zone (SEZ). These exemptions are obtained by a developer or a unit of an SEZ. The exemption is available whether or not the said taxable services are provided in the SEZ.
Conditions for grant of exemption under the subject notification.
The exemption shall be relating to taxable services necessitated by the developer or unit of an SEZ concerning the authorized operations in the SEZ which are approved by the Approval Committee.
The developer or SEZ unit should utilize such specified services with respect to the sanctioned operations in the SEZ and disburse service tax on such specified services.
The exemption shall be granted by means of a refund of the service tax paid on the specified services.
Cenvat Credit of the service tax paid on the specified services will not be considered under the Cenvat Credit Rules, 2004.
The exemption shall be relevant with respect to service tax paid on the specified services on or after the date of publication of the subject Notification.

Refund Route

Up till now, a refund route was taken up for providing service tax exemption to services consumed within the SEZs.

Under the refund route, the service provider was obliged to pay the tax initially and then the refund is claimable by the developer/unit.

Vide a circular by The Central Board of Excise and Customs (CBEC) it was stated that unqualified exemption would now be available to services consumed within the SEZ not following the refund route.

It was clearly stated that exemption by means of refund would be limited to only those circumstances where taxable services provided to SEZ developers/units are consumed to some extent or entirely outside SEZs.

With the process of general elections now completed and the results declared, the CBEC has now issued a notification to restore the earlier exemption.

In the meantime, the CBEC has repeated that refund of service paid on taxable services utilized in relation to the authorized operations in the SEZ should be disposed of expeditiously.

Refund Claims

The refund claims must be finalized within a maximum period of 30 days from the date of filing of refund claim and in any case, not beyond 45 days from the date of filing of the refund claim.

To avail exemption from service tax w.e.f. 01st April 2009, i.e., financial year 2009-10 you should not have total turnover of over Rs. 10 lakh in the financial year 2008-09. If the turnover exceeds Rs. 10 lakh in 2008-9, no exemption from service tax can be availed in 2009-10.

Threshold exemption limit for individual, HUF, BOI and AOP increased by Rs. 10,000/-
Threshold exemption limit for women increased by Rs. 10,000/- and for senior citizen increased by Rs. 15,000/-

Goods and Services Tax