Soon, e-refund of taxes for services exporters

NEW DELHI: Infosys, TCS, Wipro and a slew of services exporters will soon get electronic refunds of taxes they pay on their inputs, a repeated demand from the sector. The finance ministry is mulling a new duty drawback scheme for services sector.

“There is already a model available for merchandise exporters...A similar template is being worked out for services exporters,” said a government official privy to the development.

A drawback scheme would allow the government to fix an annual rate, as is the case for merchandise exports, at which the refunds would be given out.

Hundreds of crores of tax refunds of leading IT players of past years are pending, hurting the sector already hit hard by the slowdown in the developed world.

The government’s several attempts including the one in the last budget to resolve the issue has failed to satisfy the industry that continues to complain of delays.

Services exported are consumed overseas and as a principle no taxes can be levied on them. The government, therefore, refunds all taxes paid on inputs that go into exported services. However, in many instances the services exporters were also consuming services, which called for a separation of the two.