Many states have a sales tax exemption for businesses that use gas, water, and electricity for the express purpose of production or manufacturing. If your company has been paying taxes on these utilities, not only is there the possibility that you can receive an exemption on a percentage of future sales tax, but you may be entitled to a full or partial refund of previous sales tax paid on utilities.

Understanding the law on utility sales tax exemptions in Indiana can have a huge impact on your operating costs. Sales and use taxes apply to retail purchases and Indiana law specifies that utilities purchased for use in production, manufacturing, agriculture, and several other specific types of businesses, are not retail purchases and thus exempt from the sales tax. In order for your gas, electric, and other utility purchases to be exempt from sales tax, it needs to be purchased from a public utility or power company and either metered separately from your other utility use or otherwise separated from your non-exempted utility use.

The law in Indiana provides for only public utilities to be exempted for production, manufacturing, and other appropriate use, so for example, propane, gasoline, coal, etc., are not exempted from sales tax and still qualify as retail purchases. Examples of utilities that are exempted from sales tax include electricity, gas, water, and steam.

Not sure if your company’s utility use is exempt from sales tax? If the utility use is specific to the product your company produces, it is exempt. On the other hand, if the utility use is for the comfort of the employees, it is not exempt.  For example, keeping a room at a specific humidity level because otherwise the product would fail would be utility use that might qualify as exempt. Determining what utility use is exempt and what is not is complicated and the help of a professional might be necessary in your application process.

Determining and proving the percentage of utility use that qualifies for the sales tax exemption is the burden of the tax payer. You will need appropriate documentation to prove the percentage of utilities used for the production or manufacturing in your business and fill out the necessary paperwork required for the exemption to be approved. This process can take anywhere from several weeks up to several months to complete.

The complex nature of determining your company’s sales tax exemption often requires the use of a law firm that specializes in sales tax exemptions as an appropriate expenditure. Companies that specialize in areas like this can analyze all necessary data and determine your percentage of exemption for you. Often they will fill out the necessary paperwork and file the application for you as well.

Hiring a company to assist in filing your sales tax exemption for you is also worth the cost because they can help determine if you qualify for a full or partial refund of taxes already paid. There is a limit on how far back you can receive a refund on your utility sales tax, but any amount refunded can be a huge help in your company’s financial accounts. Additionally, having the proper sales tax exemptions set up will potentially save your company a significant amount of money over the years.

Understanding the law regarding utility sales tax exemption in Indiana is important to saving you the most money and you may wish for an updated study to validate that you are still receiving the greatest exemption possible. Many of the companies that will help you set up your exemptions will also audit your utility usage and ensure that you are utilizing this law to the greatest extent.

If you own a business, then you know about the nightmare that is paying taxes. You’re paying everything from income tax, to self-employment tax, to employment tax, to sales tax, to utility sales tax, and more. Most of those taxes must be paid and cannot be exempt in any way, except for the utility sales tax in certain states. To have a tax be exempt means you either get to pay a reduction of what you normally would, or you don’t have to pay it at all. This is great news for anyone who owns a business or is thinking about owning a business in Indiana, because all you have to do is fill out a form and get an exemption for those taxes, and there are places that can do it for you.

Filing taxes can be a complicated and time-consuming thing for someone who already knows how to do taxes. For those who don’t know how, the job would not be impossible, but extremely difficult. People take courses on how to do taxes, and it is not something you can learn to do overnight. Thankfully, there are companies whose job it is to do other people’s taxes, whether that be for an individual or for a business. When you own a business, you already have a lot on your plate. While you do have people working and doing different tasks for you, everything will eventually fall on you. Something that doesn’t have to fall on you is doing the taxes for your entire company, which is why it is important to find a company that specializes in business taxes. A service like this can help you with all of your tax needs, including sales and usage, real property, personal property, and utility. Not only can they help you do these taxes, but they can help you get an exemption for some of them. If you have a company in Indiana, they can help you get an exemption on utility taxes, because their job and their aim is to save your company money. 

Utility sales tax exemption in Indiana is a wonderful thing. If you don’t already know, when you have a business that uses utilities of any kind when it comes to manufacturing, you’re being taxed. That means that if at any point you use electricity, heat, water, fuel, gas, etc., you’re going to have to pay a tax for it. Unfortunately, it is impossible to not use any of these utilities, which is just one more thing to worry about paying for. If you’re trying to get your business off the ground, you might not even have the money to pay all of these taxes, but if you fill out an exemption form, you can potentially eliminate a lot of them. The process goes like this: someone will examine your form, analyze your utility use, and decide if your company qualifies for the exemption. All of this is a painless process for you, and if you make the cut, then you can save a ton of money and time and put it all towards your business. With everything else that you have to do for your company, it just makes sense to eliminate this potentially troublesome task.

Not all states apply for this exemption, so if you have a business in Indiana, it would be beneficial for you to take advantage of this. Utility sales tax exemption in Indiana should not be passed up if it is an option for you and your company. There are important things to spend your time, energy, and money on, and utility taxes is not one of them.

Exemption to E Cess & SHE Cess- Really Lucrative?

An article by:

CA Pradeep Jain,

CA Neetu Sukhwani &

Somya Jain

Right from the common man to the corporates and foreign investors, where everyone was expecting the government to deliver a reform-oriented Budget, but the changes proposed in the Budget announced by the Hon’ble Finance Minister took all the hopes in vain. Even before the cheer over the raising of tax exemption limit could have died down, Budget 2015 delivered a staggering blow by hiking the rate of service tax from 12.36% (including Education Cess and SHE Cess) to 14%. Likewise, the rate of excise duty was increased from 12.36% (including Education Cess and SHE Cess) to a consolidated rate of 12.5%. Not only this, Swatch Bharat Cess of 2% on the value of taxable services has been proposed thereby leading to service tax rate to be 16%. In order to calm down the temper of the declared hike in the excise and service tax rates, the government gave “so called relief” by exempting the levy of Education Cess and SHE cess. The Education Cess levied under section 91 read with section 93 of the Finance Act, 2004 on excise duty is being fully exempted vide notification no. 14/2015-CE dated 01.03.2015. Similarly, SHE Cess leviable under section 136 read with section 138 of the Finance Act, 2007 on excise duty is also being fully exempted vide notification no. 15/2015-CE dated 01.03.2015. However, with respect to Education Cess and SHE Cess levied on service tax under section 95 of the Finance Act, 2004 and section 140 of the Finance Act, 2007, the same will cease to have effect from a date to be notified by the Government. Not only this, the TRU Letter dated 28.02.2015 also clarifies that till the time the revised rates comes into effect, the ‘Education Cess’ and ‘SHE Cess’ will continue to be levied in service tax. It is worth noting that the Education Cess and SHE Cess in Customs is not being exempted. Consequently, there is no final “Bye Bye” to Education Cess and SHE Cess. It is submitted that providing exemption to levy of Education Cess and SHE Cess all of a sudden, that too, with respect to Excise and Service Tax only leaves many questions that remain unanswered and will only lead to litigation in days to come.

Whether credit balance available as on 01.03.2015 to lapse? First and foremost question that arises in the minds of the assessees is that what will be the fate of the credit balance of Education Cess and SHE Cess pertaining to excise duty lying with them as on 01.03.2015 because the exemption to Education Cess and SHE Cess of excise duty is applicable w.e.f. 01.03.2015. There is no express provision as regards the lapse of balance of credit available with the manufacturers or the provision of its utilisation in future or its refund in the Budget provisions. Moreover, the credit of Education Cess can be utilised only for payment of Education Cess and likewise, the credit of SHE Cess can be utilised only for payment of SHE Cess. Consequently, the balance of cenvat credit of Education Cess and SHE cess available with the manufacturers will become a “sheer cost” unless and until a clarification as regards disposal of the available cenvat credit balance of Education Cess and SHE Cess is issued by the government. One view that may be taken is that the balance of Education Cess and SHE Cess may be retained by the manufacturers and may be used if any demand is fastened against them for the prior period in future. Alternatively, one may also view that the intention of the government is to grant temporary exemption to the levy of Education Cess and SHE Cess because there is no such exemption with respect to Customs duty and also, the government could have abolished it altogether instead of granting exemption from its levy.

Credit eligibility on transit goods as well as on input services:-  Supposing the goods are dispatched on February 27 and received in the factory of manufacturer in the month of March. The Education cess and SHE cess will be charged on the same. But the credit will not be available as there is no Education cess and SHE cess leviable on the final product. Similarly the education cess and SHE cess is payable on service tax. It will be discontinued on the date notified after the enactment of budget. But the credit of the same will not be available to manufacturers. This will add to cost of their goods.  

Whether discrimination between excise and service tax assessees proper? It is further submit that with the gap created in the grant of exemption of Education Cess and SHE Cess on excise duty and that on service tax to be applicable on a date to be notified later, the government has put the service providers at a relatively advantageous position than the manufacturer assessees. This is for the reason that the Education Cess and SHE Cess will be continued to be levied until the new service tax rates are effective and so the service providers will continue to utilise their credit balance till notified date. However, if we talk of manufacturer assessees that avail input services, they will have to bear additional cost of Education Cess and SHE Cess levied on input services availed by them because they would be unable to utilise the same. But, the manufacturer who is service provider also will be saved from the absurd situation. This will be termed as step towards GST or step away from GST where the rates of service tax and excise are different and credit provisions will also apply differently for both of them.

Whether reversal under Rule 6(3)(i) of 6% still proper in light of hike in duties? It is submitted that when the issue of availment of credit of inputs/input services commonly used by assessee is considered, it is found that the government seeks to deny the cenvat credit attributable to inputs/input services that are used in the manufacture of exempted goods or provision of exempted services. Moreover, if the present provisions of credit reversal as contained in Rule 6(3)(i) of the Cenvat Credit Rules, 2004 are pursued, they warranted approximately 50% of the credit reversal because the rate of duty of excise and service tax was 12%. Consequently, the credit reversal under Rule 6(3)(i) was 6%. However, when the government has hiked the service tax rate to 14% (effectively 16% as there is 2% Swatch Bharat Cess) and has also hiked excise duty to 12.5%, then whether the rate of credit reversal of 6% will be proper or not is also another question that the government appears to have skipped.

How to apportion duties under Pan Masala Rules for the purpose of claiming abatement? Another question that has arisen in the minds of the assessees working under compound levy scheme is that how the abatement amount will be apportioned under various heads of duties. As it is known that in compound levy scheme, a fixed amount of duty is paid which is apportioned in the specified ratio under different categories of duties. With this budget, the apportionment under Education Cess and SHE Cess has been specified as “0”. However, for claiming the amount of abatement for the prior period, the manner of computation will be highly debatable and will be prone to litigation. In abatement, no cash refund is allowed but the manufacturer is allowed to adjust the duty in ensuing months. If so, the department will allow the abatement of education cess and SHE cess but it cannot be adjusted as there is Education cess and SHE cess on final product now. So, refund of the same in cash should be allowed.

Whether assessees claiming benefit of Notification no. 01/2011 and 2/2011 benefitted? It is also worth observing that although the rate of excise duty has been hiked from 12.36% (Including Cesses) to 12.5% (without cess) but the assessees availing the benefit of concessional rate of duties as contained in Notification no. 1/2011 and 2/2011 will pay 2% and 6% duty instead of 2.06% and 6.18%. Hence, it can be said that they have been benefitted by the exemption from Education Cess and SHE Cess granted by the government.

Manufacturers of stainless steel patta patti :- The manufacturers of Stainless steel patta patti are working under special procedure under notification 17/2007 and paying duty in advance. They have already paid duty, education cess and SHE cess for the month of March 2015. But there is no education cess and SHE cess for the month of March 2015. The only remedy for them is to claim refund of the same. But claiming refund of small amount of Rs. 1200/- per month and to clear the doctrine of unjust enrichment is a big hurdle.

Before parting:- Before concluding, we wish to submit that one of our suggestions in our Article titled:- “BUDGET 2015: STEPPING STONE TO SIMPLIFIATION?” was that there should be a single rate of tax so that the requirement of maintaining separate cenvat credit balances of Education Cess, SHE Cess is dispensed with which appears to have been considered by the government. However, the back door route of providing exemption has made the amendment prone to litigation. Moreover, It is submitted that on one hand, the new government is making earnest efforts to introduce and implement GST, which is a unified tax measure that is aimed at streamlining the different rates of service tax and excise duties to one consolidated rate of tax and has made promises to implement GST by April, 2016. However, on the other hand, the amendments proposed in the Budget seeks to create greater disparity between the rates of excise duties and the service tax. The effective rate of excise duty has been declared as 12.5% while the effective rate of service tax has been made 16%. The assessees expected a budget with changes that facilitate in introducing the unified tax reform GST but on the contrary, it seems that the implementation of GST is a remote possibility in the coming years.

As a business owner, finding ways to trim the fat from your operating budget is something that seems like a never-ending battle. One of the ways that business owners can keep a little more money in their business is by applying for a utility sales tax exemption in Indiana. If this is a new concept to you, keep reading to learn how this popular exemption can save your company money.

What is the Utility Sales Tax Exemption?

Utility companies not only charge you for the actual amount of energy you use, but you’re also charged a tax. With the utility sales tax exemption, your company may be able to avoid paying the taxes on your gas, electric, or water usage.

What Companies are Eligible for Exemption?

In order to receive the exemption, your company needs to complete Form ST-200. This is form is the Utility Sales Tax Exemption application. Your company must fill out an application for each separate utility. For example, your company uses electricity, water, and steam. Therefore, you must fill out a form for each of these utilities separately. Form ST-200 is not a one-size-fits-all form. With the application, you must also send a copy of a recent bill for the specific utility you’re seeking tax exemption status from.

Are there Special Rules for Non-profit Organizations?

If you are a non-profit organization, you’ll also need to provide information describing the purpose or mission of your organization. You’ll claim your refund by submitting Form GA-110L. On this form, you’ll be required to give an explanation of why you’re due the refund and include documents that support your claim for the refund. The following must be included with the documentary evidence:

• Copies of past bills
• Billing history from the utility company that shows the amount of taxes paid for each period (monthly, quarterly, or annually)
• Copies are acceptable, but must have the company’s letterhead with contact information and clearly visible account information

Documentary evidence and the GA-110L form must be submitted separately for each utility for which you are claiming a refund.

Can Companies Claim Refunds for Past Years?

Unfortunately, the answer is no. If you’ve just discovered this exemption, it is logical that you would want to recoup the sales tax you paid for all the prior years you were charged utility tax but it’s not an option. However, you can claim a refund for sales tax that was collected during the current year and the 3 years prior.

For example, if you’re claiming an exemption for the first time for 2015 utility taxes, you can also submit a request for 2014, 2013, and 2012 utility sales tax. You’ll need a separate form for each year and, again, for each utility.

When Is the Deadline to Submit an Exemption?

The deadline to submit an exception is December 31 of the current year. If you’re claiming the current year as well as the past 3 years, you’ll need to make sure that your forms are postmarked by 11:59 p.m. on December 31st.

Consult with Your Tax Advisor

Lastly, if you have further questions about the exemption process, you’re encouraged to speak directly with your tax advisor. There are many ways that companies, both non-profit and for-profit, can save money on their yearly and quarterly tax requirements. Your tax advisor will be able to go over your personal situation and make recommendations for other filings. He or she will help make sure you’re following the tax laws precisely so you are not at risk for penalties or legal action.

For more information on the utility sales tax exemption in Indiana, you may also want to contact the state’s department of revenue.