Service Tax Relief for Exporters Proposed

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Jun. 16 – India’s Commerce Department is preparing a proposal that may exempt exporters from paying taxes on  services and just require filing a return as proof.

Currently, the finance ministry only allows exporters to claim refunds for around 20 services after taxes at a fixed rate of 10 percent of the service’s value.

Exporters usually avail of services such as banking, port services, transport of goods by road and railways, general insurance, technical testing and analysis, storage and warehousing, business exhibition services and specialized cleaning services for their business operations.

Commerce department officials said that instead of refunding taxes paid on services, exporters should just be given a blanket exemption and file a return.

“Claiming a refund is a pain-staking process. Exporters keep complaining that their funds stay locked with the government at a time when there is a global credit crunch. So, we are pushing for service tax exemption,” an unnamed commerce department official told The Economic Times.

He added:“For instance, if an exporter uses a truck to transport goods for export from his factory to the port and does not pay service tax on it, he can get a receipt for it and attach it with his returns. Since the receipt will have the details, including the points of loading and unloading, he can’t cheat.”

The government has pledged that it would help the export industry adversely affected by the global financial crisis. Merchandise exports dropped again for the eight straight month in May, a 30 percent decline.