We manufacture plastic pellets and use the services of several goods transporters for dispatching our goods to the customer premises. We make the sales to our customers on a free-on-rail (FOR) destination basis. Kindly advise if we are eligible for service tax credit on the outward transportation of our products.

The eligibility to Cenvat credit would depend upon the ?place of removal? of the goods. It has been clarified in the recent Board Circular 97/8/2007 that in certain cases, like yours, where the sale has taken place at a destination point, the service tax credit paid on transportation services would be available to the manufacturer upon satisfaction of certain conditions. The conditions that need to be satisfied are that in terms of the sale agreement the manufacturer is able to prove that ownership remains with the manufacturer until delivery of goods in an acceptable condition to the purchaser; the risk of loss or damage to the goods remains with the seller during transit and freight charges are an integral part of the price of goods. If the contracts with your customers satisfy the above conditions, the service tax credit paid on the transportation charges up to such place of sale should be admissible.

We are engaged in the manufacture of handsets and export our entire production to Europe. We avail a host of services in relation to the manufacture of our products like security, telephone, goods transport and insurance. We have been claiming refund of the service tax paid on all such services. We have been advised that a recent notification has been issued that provides for exemption of service tax for specified services used for exported goods and refund under Rule 5 of the credit rules would not be available for such services. Please let us know whether this advice is correct?

Rule 5 of the Credit Rules provides for refund of service tax paid on input services to a manufacturer-exporter of final products after adjusting the credit against his output service tax/excise duty liability. In light of Rule 5, it appears that you should continue to be able to claim refund of service tax with respect to all input services used in the manufacture of exported final products after appropriate adjustments. You could also claim as an exemption under notification 41/2007 service tax paid on specified services?transport of goods by road and rail from ICD to port of export and port service as an exemption (as a refund) as well.

We are a security agency located in Gurgaon. One of our US clients has sought our assistance in providing security to certain high-profile employees of their US office during a visit to India. We will receive the payment in dollars when the assignment is completed. Are we liable to pay service tax for such services provided to our client outside India?

The security services provided by you would be taxable under the category of ?Security agency?s service? and the same would be outside the purview of service tax if it qualifies as an export.

The conditions specified for security service to qualify as an export is that such service is provided from India and used outside India; the consideration is received in convertible foreign exchange and such service is partly or wholly performed outside India. It seems the services to be provided by you are entirely performed within India and further, such services will be used within India. Hence, your services would be subject to service tax.

We are a FMCG company and have entered into an agreement with a group company to lease a portion of our premises at Mumbai, Delhi and Kolkata from January 1, 2008 for a period of five years. Each of the premises will be leased for a consideration of Rs 60,000 per month. Kindly advice if we are liable to pay service tax.

?Renting of immovable property? has been introduced as a taxable service from June 1, 2007. In this context, notification 6/2005-ST provides an exemption from service tax to service providers where the aggregate value of taxable services provided from one or more premises does not exceed Rs 8 lakh. The aggregate value of taxable service that you provide from Mumbai, Delhi and Kolkata will not exceed Rs 8 lakh for the financial year 2007-08 and therefore, there will be no liability to pay service tax during such period. However, you might be liable to pay service tax from the financial year 2008-09 as the aggregate value of taxable service that you receive from the above premises under the category of ?renting of immovable property? would exceed Rs 8 lakh.

?Respondents are senior professionals at Ernst & Young. The replies do not constitute professional advice, but are based on interpretation of facts available in readers? queries to the professionals. Neither Ernst & Young nor this publication are liable for any action taken on the basis of this information