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Circular No.118 /12/2009-ST

F.No.341/15/2007-TRU

Government of India

Ministry of Finance

Department of Revenue

(Tax Research Unit)

****

North Block, New Delhi,

23rd November, 2009.

Subject: Refund of service tax paid on foreign agent commissionby exporters – Notification No.18/2009 dated 07/07/2009 – clarification - Reg.

Representations have been received from exporters, seeking clarification whether ten per cent of free on board (FOB) value of export goods allowed as foreign agency commission vide Notification 41/2007-ST dated 06/10/2007 as amended, has been reduced to one per cent vide Notification 18/2009-ST dated 07/07/2009 .

2. In the context of refund of service tax paid on foreign agency commission, Notification 18/2009 dated 07/07/2009 (in the table, sl.no.2 , condition no. 2) says “exemption shall be limited to one percent of the free on board value of export goods for which the said service has been used”. This means that amount of service tax paid, which can be refunded to the exporter, is restricted to one percent of the FOB value of export goods in relation to which the taxable service of the foreign agent was used.

3. The current rate of service tax being ten per cent and the maximum allowable limit of foreign agency commission being ten percent of FOB, one percent of the FOB value of export goods is the maximum exemption of service tax. To settle all doubts to rest, for the purpose of service tax refund, maximum allowable foreign agency commission on export goods continues to be at the pre-budget level of ten percent of the fob value of export goods till further changes are notified.

(J. M. Kennedy)

Director (TRU)

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GST India Solution is an effort of firm of professionals who welcome implementation of GST. This is an interactiveplatformthat aspires to disseminate right knowledge to professionals, practitioners and public at large. This platform has beenfloatedbya firm of Chartered Accountants relentlessly working in field of direct and indirect taxes since early 1985.

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The senior partner of the firm has to his credit several professional publications viz., Delhi Sales Tax Right to Use Goods Act, Delhi VAT, Maharashtra VAT, West Bengal VAT, Haryana VAT published by Taxmann. Madhya Pradesh VAT and Chhattisgarh VAT were published by Suvidha Law House, Bhopal. He has also addressed seminars on indirect taxes organized by professional bodies like ICAI, IMA, NIFM etc. and has also contributed articles on subjects of pro. . . . .