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Service tax is levied on all services other than those specified in negative list'
September, 17th 2013

We are a unit registered with Software Technology Park of India (STPI). For the services that STPI gives to us, service tax is being charged. Is it correct and, if so, under what provisions?

Under the new service tax regime since 1.7.2012, as per Section 66B of the Finance Act, 1994, service tax is levied on all services provided or agreed to be provided in the taxable territory, other than services specified in the negative list. The service you mention is not covered under the negative list in Section 66D of the said Act. The said service is also not exempted under any notification issued by the Government. Therefore, charge of tax on services provided by STP is quite correct.

Can we utilise the Cenvat Credit taken of duty paid on capital goods and inputs towards payment of excise duty on trial production?

The answer is 'yes', provided the final products you get from trial production are dutiable. In case they are not dutiable but you have common inputs that go into manufacture of dutiable and non-dutiable final products, you may examine the options under rule 6(2),6 (3) and 6 (3A) of Cenvat Credit Rules, 2004.

We manufacture and supply plants for petrochemicals companies. For one of our projects we intend to supply the material from our SEZ unit to our customer who is in DTA and is an EPCG licence holder. Could you please guide us on the procedures for the same?

You can ask the DTA buyer to give you an authority to file a Bill of Entry on his behalf and also give you the EPCG licence along with the Release Advice from the port of registration. Then you can file the Bill of Entry with the SEZ Customs on behalf of your customer and ask the Customs to debit the EPCG licence and grant clearance as per the relevant customs notification for import under the EPCG licence.

Can we claim duty drawback for supplies made to EOUs and SEZ units and also count the same towards export obligation against imports of equipment against EPCG licenses?

Yes. As per Para 5.3 (d) of the FTP, Shipments under Advance Authorisation, DFRC, DFIA, or Drawback scheme, or incentive schemes under Chapter 3 of FTP would also count for fulfilment of EO under EPCG Scheme. As per Para 5.3 (f) of FTP, deemed exports as specified in paragraph 8.2 (a), (b), (d), (f), & (j) of FTP shall also be counted towards fulfilment of the export obligation, along with the usual benefits available under paragraph 8.3 of FTP.

Do I have to pay service tax on interest that our customer gives us for delayed payment of our bills?
No. In terms of Rule 6(2) (iv) of Service Tax (Determination of Value) Rules, 2012, interest on delayed payment of any consideration for the provision of services or sale of property, whether movable or immovable, is excluded from the value of taxable services.

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