Nath steps in to hasten relief for exporters

NEW DELHI: The delay in notification of service tax exemption for exporters by the finance ministry has prompted commerce & industry minister Kamal Nath to request Prime Minister Manmohan Singh to hasten the relief.

In a recent letter, Mr Nath pointed out that even three months after the exemption was announced in this year’s foreign trade policy, the finance ministry was yet to act on it. As per the policy announcement, exporters are to be given service tax exemption for services consumed outside the country while for services utilised within the country for export purposes, a refund would be given. The notification was supposed to be made within a month of the policy announcement on April 19.

While the finance ministry has notified a package for exporters struggling to cope with the appreciating rupee, exporters have been looking forward to the announcement of service tax exemption for relief. The export package announced last week includes increasing rate of reimbursement of input taxes for exporters by 2% to 3% and lowering interest on export credit.

Commerce department officials said before the announcement of the exemption, the department had got finance ministry’s nod. “Finance ministry seemed to have some reservations about the services which will be covered under the proposal. We negotiated a list of services covered and they had agreed to it,” the official said.

The commerce department has identified at least a dozen services on which refunds could be made. These include warehouse, courier, banking, inland haulage and registration charges, commission to foreign agents and port charges.

As a precaution against misuse of the incentive, the government has laid down that service tax on the identified services would be compensated only to the extent these relate to export of goods.

“We have laid down that refunds would be made only against export documents submitted by exporters, so there is no chance of misuse,” the official added.