Govt allows IT firms to claim service tax refund

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Govt allows IT firms to claim service tax refund
New Delhi: The IT services and BPO industry will now be able to get its service tax refunds, running into a few thousands of crores, expeditiously, as the government has announced a procedure to resolve the issue, reports Economic Times. The Central Board of Excise and Customs, the apex indirect taxes body has issued a circular directing its field officials to issue pending service tax refunds within 30 days, and also relaxed certain norms for issue of such refunds. These refunds will boost the bottom lines of software exporters. The definition of services used as 'inputs' by technology and BPO firms becomes clear through this circular. Service tax paid on inputs like, transportation of staff, telecom facilities, software maintenance and upgrades, provision of food to employees working in 24x7 environment, hiring recruitment agencies and other related services, would be eligible for refund. "In case, absence of an input service adversely impacts the quality and efficiency of the provision of service exported, it should be considered as eligible input service," the circular said. "The circular is a positive step towards clarifying the issues faced by the departmental officers in granting refunds but it will be useful to the industry only if the refunds are, henceforth, granted to them," said Bipin Sapra, Partner, Ernst and Young. Nasscom had been lobbying with the government to resolve this for over a year and, in a June 2009 notification, the government had said that 80 percent of the refunds will be paid immediately and the balance, after investigation. The procedure on self certification of data by the service exporter will help the authorities in disposing off pending claims and will benefit both the exporters and the authorities.