Annual Supplement To Foreign Trade Policy: The Day After
A
day after the Annual Supplement to the Foreign Trade Policy 2004-09 was
unveiled, confusion prevailed over a key pronouncement related to
service-tax benefits for the Indian exporters.
At a CII
discussion today, Commerce Secretary Gopal K Pillai said service-tax
exemption was only for goods export and not for the services sector.
The
trade policy specifies that “for all goods and services exported from
India, services received, rendered abroad, wherever possible, shall be
exempted from service tax”.
The policy also provides for
remission of service tax paid on goods and services which are exported
from units in the domestic tariff area, export zones and software
technology parks, among others.
The move to exempt service
tax on exports had been welcomed by some service sector companies, in
the belief that they stood to benefit too.
A finance ministry
official expressed surprise over the service tax-related announcement
in the policy. “Goods are already exempt. We also have a scheme for
exports of services. The principle of not exporting taxes is already
upheld,” he said.
“The commerce ministry should tell us what
the export-related services that are taxed are and the nexus (the
transaction trail for them). In any case, none of this can be
implemented without a notification.”
Tax expert S Madhavan,
leader, indirect tax practice, PricewaterhouseCoopers said the
announcement was essentially a statement of intent, which needs further
consultations.
“The ministry is attempting to bring in a
scheme similar to the drawback... to add on what already exists.
Exports of goods have always been exempt and the benefit is taken...
through drawbacks or excise exemptions. The scheme for exports of
services is a year-and-half old. Refunds under this scheme will begin
in a week.”
A Directorate General of Foreign Trade (DGFT)
official said the word ‘services’ should not have been used in the
foreign trade policy in the context of exports from India. This has led
to some confusion, especially as the annual supplement document uses a
slightly different language.
The DGFT official added the
department was of the opinion that for most services to the services
sector, no service tax is payable.
“Hence a decision was
taken to not to extend the benefits to them. But it seems that many
services, which service sector companies receive for their exports, are
being charged service tax. Hence, we have asked for a list of services
which they receive and on which they are paying service tax,” the
official added.
“A notification will be issued regarding this, but it would take time, as a process has to be followed,” he said.
Confusion over service tax
Last updated: 24 April 2007
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