1. The Provisions relating to the Export Services are contained in the Export of Services Rule 2005 issued per Notification No 9/2005-ST dated 3-3-2005 and further amended by the Notification No. 13/2006-ST dated 9-4-2006.
2. The Export Rules provide for 3 types of Export Services (Rule3) out of which services like BPO etc. fall in the 3rd Category i.e. under Rule 3(iii).
3. Rule 3(iii) reads as follows:
3. Export of taxable service.– (1) Export of taxable services shall, in relation to taxable services‚–
(iii) specified in clause (105) of section 65 of the Act, but excluding‚–
(a) sub-clauses (zzzo) and (zzzv);
(b) those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and
(c) those specified in clause (ii) of this rule,
when provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service:
Provided that where such recipient has commercial establishment or any office relating thereto, in India, such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India.
4. Therefore the BPO Services as said by you squarely fall within the Rule 3(iii) of the said Rules.
5. Further Clause 2 of Rule 3 provides the following:
(2) The provision of any taxable service shall be treated as export of service when the following conditions are satisfied, namely:–
(a) such service is delivered outside India and used outside India; and
(b) payment for such service provided outside India is received by the service provider in convertible foreign exchange.
6. Rule 4 states that any taxable services may be exported with out payment of tax.
7. The following is the text of Rule 5: Which states that the Govt. may grant the rebate of the service tax paid on export service, and on IPS and ED paid on IPS.
Rebate of service tax.- Where any taxable service is exported, the Central Government may, by notification, grant rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, as the case may be, used in providing such taxable service and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification.
8. The provisions for grant of Rebate are contained in the Notification No. 11/2005-ST Dt 19-4-2005: The following are some of the conditions among others:
(a) that the taxable service has been exported in terms of rule 3 of the said rules and payment for export of such taxable service has been received in India in convertible foreign exchange;
(b) that the service tax and cess, rebate of which has been claimed, have been paid on the taxable service exported
9. The Clause 3 of the Notification No 11 gives the procedure for the claim. Basically you have to give an application in Form ASTR-1 - the format is given in the same notification. But the problem is that this talks about rebate and not refund - which is applicable as in your case.
10. Let us dig into the Cenvat Credit Rules 2004 a bit (Notification 23/2004 dated 10-9-2004) : Rule 3(1) states that a provider of taxable service can take CENVAT credit of ST and ED on InPuts /InPutService/CapitalGoods - that is you should have taxable -read as domestic services - to take the benefit of Cenvat Credit. As per Rule 3(4) This Credit can be used for payment of ServiceTax on OutPutService. If you have only export services you will not be a provider of taxablel services and you will not be able to take Cenvat Credit.
11. The Rule 5 of the Cenvat Credit Rules provides for Refund of Cenvat Credit. Where the OPS is exported there shall not be any ST the same. The IP/IPS credit taken remaining unutiliesd may be diverted to other OPS. Balance still remaining utilisable may be refunded to the Service Provider, provided export incentives like drawbacks, rebate etc are not availed.
12. So you can claim the entire Cenvat Credit on the IPS/IP that you have taken but could not utilize, however this provision will not be applicable if you do not have any OPS that is taxable.
2. The Export Rules provide for 3 types of Export Services (Rule3) out of which services like BPO etc. fall in the 3rd Category i.e. under Rule 3(iii).
3. Rule 3(iii) reads as follows:
3. Export of taxable service.– (1) Export of taxable services shall, in relation to taxable services‚–
(iii) specified in clause (105) of section 65 of the Act, but excluding‚–
(a) sub-clauses (zzzo) and (zzzv);
(b) those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and
(c) those specified in clause (ii) of this rule,
when provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service:
Provided that where such recipient has commercial establishment or any office relating thereto, in India, such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India.
4. Therefore the BPO Services as said by you squarely fall within the Rule 3(iii) of the said Rules.
5. Further Clause 2 of Rule 3 provides the following:
(2) The provision of any taxable service shall be treated as export of service when the following conditions are satisfied, namely:–
(a) such service is delivered outside India and used outside India; and
(b) payment for such service provided outside India is received by the service provider in convertible foreign exchange.
6. Rule 4 states that any taxable services may be exported with out payment of tax.
7. The following is the text of Rule 5: Which states that the Govt. may grant the rebate of the service tax paid on export service, and on IPS and ED paid on IPS.
Rebate of service tax.- Where any taxable service is exported, the Central Government may, by notification, grant rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, as the case may be, used in providing such taxable service and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure, as may be specified in the notification.
8. The provisions for grant of Rebate are contained in the Notification No. 11/2005-ST Dt 19-4-2005: The following are some of the conditions among others:
(a) that the taxable service has been exported in terms of rule 3 of the said rules and payment for export of such taxable service has been received in India in convertible foreign exchange;
(b) that the service tax and cess, rebate of which has been claimed, have been paid on the taxable service exported
9. The Clause 3 of the Notification No 11 gives the procedure for the claim. Basically you have to give an application in Form ASTR-1 - the format is given in the same notification. But the problem is that this talks about rebate and not refund - which is applicable as in your case.
10. Let us dig into the Cenvat Credit Rules 2004 a bit (Notification 23/2004 dated 10-9-2004) : Rule 3(1) states that a provider of taxable service can take CENVAT credit of ST and ED on InPuts /InPutService/CapitalGoods - that is you should have taxable -read as domestic services - to take the benefit of Cenvat Credit. As per Rule 3(4) This Credit can be used for payment of ServiceTax on OutPutService. If you have only export services you will not be a provider of taxablel services and you will not be able to take Cenvat Credit.
11. The Rule 5 of the Cenvat Credit Rules provides for Refund of Cenvat Credit. Where the OPS is exported there shall not be any ST the same. The IP/IPS credit taken remaining unutiliesd may be diverted to other OPS. Balance still remaining utilisable may be refunded to the Service Provider, provided export incentives like drawbacks, rebate etc are not availed.
12. So you can claim the entire Cenvat Credit on the IPS/IP that you have taken but could not utilize, however this provision will not be applicable if you do not have any OPS that is taxable.
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