It is an ideal feature of any good taxation system that in export transactions only goods or services should be exported and not the taxes embedded in it. Keeping with this principle, the government has been time and again providing incentives to exporters on their output and input. Due to constant evolution in the tax system, obviously, government needs to amend its policy in giving effect to the widely-accepted principle of not allowing taxes to be exported. On Monday, one such step was taken by the government when it issued an exemption to four specified taxable services received by an exporter and used for export of goods. Let us see what are the implications of this exemption for exporters. Also, it may be worthwhile to see how the government could further better its export incentive policy by improvising on such exemptions and ensuring objectivity in implementation of existing incentives. First, let’s talk about the newly introduced exemption. It grants exemption to four specified services — port services provided for export, other port services provide for export, services of transport of goods by road from ICD to port of export provided by goods transport agency and services of transport of export goods in containers by rail from ICD to port of export. How will this exemption operate? First, the exporter will be charged service tax from its service vendor. Even in cases where the exporter is himself liable to pay service tax, for example, as a recipient of service of transport of goods by road, he would first pay service tax and then claim refund by undergoing a separate refund exercise prescribed. While the move to grant this exemption is certainly welcome, government could have considered granting upfront exemption instead of making service provider or recipient first pay the tax and then initiate a refund exercise, engaging precious time of the government machinery and of exporters. Presently, such upfront exemptions are already in place when services are procured by an SEZ or a unit in such SEZ. Also, merchant exporters who consume whole host of input services and do not have the ability to claim Cenvat credit (not being manufacturers) will continue to be burdened by service tax cost on input services consumed by them except for these four specified services. About practical implementation of the above incentive, while the notification prescribes time limit for filing of refund claim, it does not provide any time limit for the officer to grant the refund. It would be advisable to make the officer accountable to disburse the refund or dispose of the claim by issuing appropriate order in a prescribed time limit. Or better still would be to provide for provisional sanction of refund amount as being done in case of certain area-based exemptions – www.economictimes.com
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