Export rebate under service tax notification remains available for GTA services paid under reverse charge and used for exports

Notification No. 41/2012-ST provides rebate of service tax paid on specified services used for export of goods, and its export-rebate purpose requires a purposive reading. Clause 3(b), which disqualifies a person liable to pay service tax under Section 68 of the Finance Act, 1994, was read narrowly so that it does not defeat rebate claims where GTA service tax was paid by the recipient under reverse charge and the service was actually used for export. The practical effect is that exporters using taxable GTA services for exports may claim rebate notwithstanding reverse charge payment.

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Issues: Whether rebate under Notification No. 41/2012-ST was admissible where the exporter had paid service tax on GTA services under reverse charge mechanism and had used those services for export of goods.

Analysis: Notification No. 41/2012-ST issued under Section 93A of the Finance Act, 1994 grants rebate of service tax paid on specified services used for export of goods. The claim was rejected only because clause 3(b) disentitles the person liable to pay service tax under Section 68 of the Finance Act, 1994 from claiming rebate. The appellant had paid service tax as recipient of GTA service under reverse charge, but the service itself was used for export of goods. The notification was held to have a clear export-rebate purpose, and a narrow reading of clause 3(b) would defeat that object in reverse charge cases and deny the intended benefit to exporters who had actually used the service for export.

Conclusion: Rebate was held admissible to the assessee under Notification No. 41/2012-ST notwithstanding payment of service tax under reverse charge mechanism.

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