In the annual supplement to the foreign trade policy (FTP), the commerce ministry added 126 new products under the Focus Product Scheme (FPS), 47 new products under the Market Linked Focus Product Scheme (MLFPS) and two more countries under the Focus Market Scheme (FMS). To ensure increased supply of the duty credit scrips does not pull down their prices in the market, the scope for utilisation was also widened to include payment of service tax, fees for obtaining authorisations under FTP, composition fees for getting extensions in export obligation period and for payment of value shortfalls in advance authorisation.
The facility of payment of service tax is now available against the scrips issued under FPS, MLFPS, FMS and Vishesh Krishi Gram Udyog Yojana schemes only and not against other types of duty credit scrips. The procedures for payment are prescribed through service tax notifications 6, 7 and 8, all dated April 18. These notifications require the original holder of the scrip or transferee, who happens to be the service receiver, to get the scrip registered with the Customs, and then approach them along with a letter and an invoice or challan or bill, as the case may be, issued by the service provider, and get the amount of service tax debited to the scrip. After the debit, the Customs officer should send a written advice to the central excise officer concerned having jurisdiction over the service provider. The scrip holder should present before the said central excise officer, within 30 days, the scrip showing debits by the Customs authority, with an undertaking that he will make good any service tax short-debited in the scrip, along with interest. Based on the said written advice and undertaking, the central excise officer will verify and validate, on the reverse of the scrip, the details of the service tax leviable, debited by the Customs. The service receiver should give the service provider a self-certified copy of the scrip showing the debit endorsements and verification, which actually represent payment of service tax. Based on the debit entries in the duty credit scrip, the service receiver can take Cenvat Credit of the amount debited to the scrip.
The procedure for utilisation of select duty credit scrips for service tax payments looks quite a roundabout way of dealing with a straightforward matter. Every time, the process of getting the scrip debited by the Customs and getting the debit endorsement validated by central excise officer has to be followed. A better way is to let the service provider debit the duty credit scrip for the amount of service tax he is required to deposit with the government. Also, it is difficult to understand why duty credit scrips issued under Served From India Scheme or duty credits issued under other schemes cannot be allowed to be used for service tax payments.
The service tax notifications treat the debit in duty credit scrip as a condition to be fulfilled for getting exemption from payment of service tax. To eliminate any unwarranted litigation, the Central Board of Excise and Customs should clarify that where exemption is availed through such debits, payment of six per cent of the value of exempted service will not be required under Rule 6(3) of the Cenvat Credit Rules, 2004.
Email: tncr@sify.com
