Relief Redux: More service tax refunds on cards for exporters
HERE is something to cheer up exporters. The finance ministry is ready to include more items in the list of services for which exporters are to be refunded service tax. In addition to just four services notified by the finance ministry last month to provide service tax exemption to exporters, a new notification would be issued to provide exemption on various items including warehouse charges, courier charges, banking charges, inland haulage and registration charges, and commission to foreign agents. Last month, the finance ministry had notified that exporters would get refund of the service tax they pay for transporting goods in major and minor ports, and from inland container depots to ports through rail and roads. The notification had upset exporters as they said that the four items listed in the notification accounted for just a portion of the total service tax they paid for carrying out exports. They made a strong case for adding a number of services including commission to foreign agents in the list. In certain sectors like pharmaceuticals and textiles, service tax on commission to agents could be as much as 1.8% of the total value. The finance ministry took a long time to come up with its notification on service tax refund to exporters last month as the announcement for the exemption was actually made six months back in the foreign trade policy in April this year. The government collects 12% service tax along with 3% education cess on services. Exporters already get refund of service tax paid by them on input services used for exports. The drawback scheme also factors service tax paid on input services used for exporting goods.