Letter to Field Formations

F. No. 137/17/2007-CX.4, DT. 23/05/2007

Procedure for granting exemption from service tax to taxable services provided to foreign missions/ consulates and to the personnel posted there in India

Please refer to discussions held on the above subject between the Department of Revenue and the Ministry of External Affairs. Presently "service specific exemptions" are available to certain specified foreign missions/ consulates (vide notification Nos. 5/96-ST, 10/96-ST, 44/98-ST, 50/98-ST, 51/98-ST and 1/2001-ST), while for UN and other International Organizations a general exemption is available under Not. No.16/2002-ST. It was observed that the present service tax exemption scheme to foreign missions/ consulates and their personnel is selective and is not flexible enough to be useful for negotiations with other countries, to the extent of providing or modifying the tax concessions on reciprocal basis. It was also noted that a relatively flexible exemption system is available in respect of excisable goods vide serial No. 81 of Notification No. 6/2006-CE dated 1/3/06, and therefore, it may be preferable to modify the service tax exemption scheme in the same pattern.

02. The issue has been further examined and it has been decided to prescribe the scheme for service tax exemption in similar lines to the excise exemption, with required modifications. The scheme would now operate through two notifications, which would come into effect from 23.5.2007. Notification No 33/07-ST dated 23.5.2007 exempts all taxable services provided to foreign diplomatic missions or consular posts in India for their official use, while notification No. 34/07-ST dated 23.5.2007 exempts all taxable services provided to diplomatic mission agents or career consular officers posted in a foreign diplomatic missions or consular posts in India for their personal use. The conditions to be followed and the procedure to be observed for availing these exemptions are detailed in the following paragraphs.

3 SCHEME FOR SERVICE TAX EXEMPTION ON ALL TAXABLE SERVICES PROVIDED TO FOREIGN DIPLOMATIC MISSIONS OR CONSULAR POSTS IN INDIA FOR THEIR OFFICIAL USE.

3.1 CONDITIONS: The exemption would be available on the taxable services provided to such foreign diplomatic mission or consular post in India for its official use, which is issued with an entitlement certificate (with or without any conditions) on the principle of reciprocity, by the Protocol Division of the Ministry of External Affairs (MEA).

3.2 PROCEDURE:

STEP 1.- ISSUANCE OF CERTIFCATE BY MEA

• The Protocol Division of the MEA may issue a certificate entitling a foreign diplomatic mission or consular post in India, to receive tax free services for their official use based on the principle of reciprocity. The certificate would remain valid, till it is withdrawn, modified, annulled by MEA;

• The head of the mission/consular post after receiving such certificate, would communicate to the MEA the name and the specimen signature of the person (which may be either the head of the mission/ consular post or a person posted in such office and has been authorized by the head of the mission) who would authenticate the copy of the certificate and issue an undertaking in original for that mission or consulate. Such undertaking will bear a running S. No. commencing from the beginning of a financial year.

STEP 2.- AVAILMENT OF EXEMPTION

• The head of such foreign diplomatic mission or consular post (or the person authorized by him) would issue, a copy of such certificate duly authenticated by him along with a signed undertaking, bearing running serial number and stating that the services received are for official use of the said foreign diplomatic mission or consular post, to the service provider /person liable to pay service tax (but for this exemption). Based on such certificate and undertaking, tax free service would be provided by the provider of taxable service.

• The invoice issued by the service provider would bear the reference numbers of undertaking.

STEP 3.- VERFICATION OF THE CORRECTNESS OF AVAILMENT OF EXEMPTION.

• The authorized person of foreign diplomatic mission or consular post shall maintain an account of such undertakings issued during a financial year so that in case of audit verification or preventive checks, or in case where the bonafides of any document or transaction is, prima-facie, in doubt, the accounts of service provider (who would claim exemption) can be cross checked (through the Protocol Division of MEA) with these records.

• The service provider shall retain the authenticated copy of the certificate and the undertaking (in original) for future verification.

• In case there is reason to believe that the scheme is being misused or that the bonafides of any certificate is prima facie in doubt and it is necessary to compare the signature of the authorized person appearing on such certificate or the undertaking, the same can be done by comparing with the specimen signature available with the Protocol Division of MEA.

• If in future the Protocol Division withdraws such facilities, it shall communicate to the foreign diplomatic mission or consular post of such withdrawal. The Protocol Division would also inform the Department of Revenue (Commissioner of Service Tax, Central Board of Excise and Customs, North Block, New Delhi) about such withdrawal.

• The benefit contained in this notification shall not be available from the date of withdrawal of such certificate.

4 SCHEME FOR SERVICE TAX EXEMPTION ON ALL TAXABLE SERVICES PROVIDED TO DIPLOMATIC MISSION AGENTS OR CAREER CONSULAR OFFICERS POSTED IN A FOREIGN DIPLOMATIC MISSION OR CONSULAR POST IN INDIA FOR THEIR PERSONAL USE.

• CONDITIONS:

(a) The exemption would be available on the taxable services provided to such diplomatic agent or career consular officer working in a foreign diplomatic mission or consular post in India for his personal use or for the use of their family members, who is issued with an entitlement certificate (with or without any conditions) on the principle of reciprocity, by the Protocol Division of the Ministry of External Affairs (MEA).

(b) Such agent or officer should also hold a photo-identification-card bearing a unique serial number, issued by the Protocol Division of MEA or the Protocol Department of the State concerned.

4.2 PROCEDURE:

STEP 1.- ISSUANCE OF CERTIFCATE BY MEA

• The Protocol Division of the MEA may issue a certificate that the diplomatic agents or career consular officers working in a foreign diplomatic mission or consular post in India, are entitled to receive tax free services for their personal use or for the use of their family members based on the principle of reciprocity. The certificate would remain valid, till it is withdrawn, modified, annulled by MEA;

• The head of the mission/consular post would communicate to the MEA the name and the specimen signature of the person (which may be either the head of the mission/ consular post or a person posted in such office and has been authorized by the head of the mission) who would authenticate the copy of the certificate and issue undertakings in original for the agents or career consular officers working in such diplomatic mission or counselor post in India.

STEP 2.- AVAILMENT OF EXEMPTION

• The head of such foreign diplomatic mission or consular post (or the officer authorized by him) would issue, (i) a copy of such certificate duly authenticated by him; (ii) a signed undertaking, bearing a running serial number, the unique serial number of the identification card issued by MEA to the officer and stating that the services received are for personal use of the said agent or career consular officer or for use by his family members; and (iii) a photocopy of such identification card, duly authenticated by him to the service provider /person liable to pay service tax (but for this exemption). Based on such certificate, undertaking and copy of identification card, tax free service would be provided by the provider of taxable service.

• The invoice issued by the service provider would bear the reference number of undertaking and the unique serial number of the identification card.

STEP 3.- VERFICATION OF THE CORRECTNESS OF AVAILMENT OF EXEMPTION.

• The authorized person of foreign diplomatic mission or consular post shall maintain an account of such undertakings issued during a financial year so that in case of audit verification or preventive checks or in case where the bonafides of any document or transaction is, prima-facie, in doubt, the accounts of service provider (who would claim exemption) can be cross verified (through the Protocol Division of MEA) with these records.

• The service provider shall retain the authenticated copy of the certificate, the undertaking (in original) and authenticated photocopy of identification card, for future verification.

• In case there is reason to believe that the scheme is being misused or that the bonafides of any certificate is prima facie in doubt and it is necessary to compare the signature of the authorized person appearing on such certificate or the undertaking, the same can be done by comparing with the specimen signature available with the Protocol Division of MEA.

• If in future the Protocol Division withdraws such facilities or identification card, it shall communicate to the foreign diplomatic mission or consular post, of such withdrawal. The Protocol Division would also communicate to the Department of Revenue (Commissioner of Service Tax, Central Board of Excise and Customs, North Block, New Delhi) about such withdrawal.

• The benefit contained in this notification shall not be available from the date of withdrawal of such certificate.

Yours faithfully,

(Gautam Bhattacharya)
Commissioner (Service Tax)
C.B.E.C, New Delhi

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