ST waiver for 161 services

The foreign trade policy announcement on service tax exemption for all goods and services exported — including those from the domestic tariff area (DTA) — will be available on 161 tradable services.

The list includes all 161 tradable services covered under the General Agreement on Trade and Tariffs (Gatt) in services where such payment of services is received in free forex, according to the policy document.

As of now, the announcement is statement of fact because all payments received by domestic service providers in foreign exchange are currently exempt from service tax. But, there could be problems if the finance ministry notifies the draft rules on what constitutes export of services without making any changes.

Broadly, export is sought to be defined on where the buyer is located. The rules will be finalised after the Finance Bill becomes statute. According to officials, the commerce ministry has already forwarded its comments on the draft rules. The idea is to ensure there is no variance between the two ministries on what constitutes service exports.

According to the rules, an Indian service provider, who provides service to a foreign firm, with an office here, and receives payments in forex will have to pay service tax.