DGFT has clarified the issues relating to service tax refund and issued a circular no. 1 (RE-08)/2004-2009  dated 11-4-2008.

A. In the circular it is clarified that the following services related to Export of Services can not be subject to service tax

(i)  Participation in Exhibition outside the country;

(ii) Services availed outside the Country such as Customs House Agent (CHA) Services, Steamer Agent Services, Accountancy Services, Market Research Agency Services, Port Services, Cargo Handling Services, Inspection and Quality Control Services.

B. It further states that following services is not liable to service tax:

Receipt of Export Proceeds by exporters and payment for imports in foreign exchange will not attract Service Tax under the newly introduced "Foreign Exchange Dealer" Service.    

Clearing and Forwarding (C&F) Agency Service is not leviable to Service Tax;

Loading and un-Loading Service falls under the taxable service "Cargo Handling Service" as defined under Section 65(23) of the Finance Act, 1994 which specifically excludes handling of export cargo from the levy of Service Tax.  Accordingly, loading and un-loading of export cargo does not attract service tax;

C. In the circular it is stated that:

Department of Revenue have issued Service Tax Notifications from time to time stipulating the methodology to refund the service tax paid on exports

Further, while notifying new areas for imposition of Service Tax, Department of Revenue would simultaneously issue Refund Notifications for such Services rendered for exports wherever linkage could be established with exports by verifiable methods.    

DGFT policy circular no. 1 (RE-08)/2004-2009  dated 11-4-2008.

Service tax exemption for export-related services clarified; specified services excluded and refund mechanisms linked to verifiable export linkage. Clarification that specified export-related activities-including participation in exhibitions abroad; services availed outside the country such as CHA, steamer agent, accountancy, market research, port, cargo handling, inspection and quality control services; receipt of export proceeds and payments in foreign exchange; C&F services; and loading/unloading of export cargo-are not subject to service tax, and that the Department of Revenue will prescribe refund methodologies and issue refund notifications for services linked to exports by verifiable methods.