Claiming refund of service tax charged by cab vendors

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: We develop software for our overseas clients in Gurgaon. We understand that our services should qualify as export of services for service tax purposes from this year onwards under the new taxable category of information technology services. We are proposing to file refund claims with respect to the service tax charged on our input services used to provide the exported services. The most significant service on which we pay service tax is transportation (cab services). We have made arrangements with cab operators for transporting our employees from their residences to our office and back on a daily basis. We have been given to understand such cab services might not be construed as an ‘input service’ and the department is likely to disallow the same. Hence, we seek your advice on the possibility of availing credit of the service tax paid by us on such services and subsequently also claiming refund of the same.

As per the Cenvat Credit Rules, ‘cab services’ can be construed as an ‘input service’ if it can be established that such service is being used ‘in relation’ to activities related to business. In a recent judicial pronouncement of M/s Cable Corporation of India Ltd vs CCE, it has been held by the Mumbai tribunal that rent-a-cab service is an eligible input service, being used indirectly in relation to the manufacture or as part of business activity provided to employees resulting in greater efficiency and promotion of business. In view of the above, you should be eligible for Cenvat credit with respect to ‘rent-a-cab services’ provided to you if you are able to establish that the said services are being used in relation to your business activity. You should also be able to claim refund of such service tax amount charged by your cab vendors.

We are a vocational training institute registered with the service tax authorities under the category of ‘commercial training or coaching service’. Recently, we entered into an arrangement with a customer whereby few faculty members have been sent on deputation for four months to develop an in-house training programme. The salary paid to the faculty shall be reimbursed by the company and in addition, our customer shall pay an additional 15% fee. Are we required to pay service tax on the reimbursement of salary of faculty members by the customer.

The temporary deputation of your employees for development of the in-house training department of the company would be taxable under the category of ‘manpower recruitment and supply agency’s services’ as the same constitutes supply of manpower by you on a temporary basis. Therefore, you are liable to pay service tax on the consideration received for the services provided. The consideration liable to service tax would include the 15% fee as well as the reimbursement of the salary costs, as both these components would together constitute the gross amount charged for the deputation services provided by your institute.

We are a Goods Transport Agency (GTA) that various customers engage for transportation of raw materials and finished goods. The current Budget has made the services ‘in relation to supply of tangible goods for use, without transfer of possession and effective control’ taxable from May 16, 2008. Consequently, supply of goods carriages to us (trucks and lorries) by the owners for transportation of goods became liable to service tax. Since we do not have significant service tax liability, we are unable to claim credit of the service tax paid by us to the owner of the goods carriage and this tax amount is a cost for us. How best we can salvage this situation?

Following representations by the Vehicle Owners’ Associations and others, regarding relief with respect to levy of service tax on supply of goods carriage to GTA for use in the transport of goods, the government has vide notification number 29/2008-Service tax dated June 26, 2008, exempted service tax on supply of goods carriages to GTAs for use in transportation of goods by road. In view of the above, you would not have to bear the service tax cost with respect to hiring of goods carriages from the notified date.

Our service tax payment for the preceding financial year was Rs 53 lakh. We have been advised that we are mandatorily required to pay service tax electronically. Is this correct?

E-payment of service tax has been made mandatory with effect from October 1, 2006 for all assessees who paid service tax of Rs 50 lakh or more in the preceding financial year or in the current financial year. In light of the same, it is mandatory for you to make e-payment of service tax, as the amount of service tax paid by you exceeded Rs 50 lakh during the preceding financial year.