12 more export services likely to get tax refund

Exporters hit by the strengthening rupee against the dollar may find some solace in the forthcoming Budget. The finance ministry is finalising a fresh set of a dozen export related services that could become eligible for service tax refund.

?The finance ministry has, in principle, approved providing service tax refund on export related services. There are certain technical issues relating to apportioning the tax on some of the services and the relation of the services to the export process which is now being sorted out,? a government source said.

Sources also said the ministry of commerce has prepared a separate Cabinet note asking for service tax refund on these 12 services, in case Budget 2008-09 fails to provide relief.

The government has so far doled out sops worth over Rs 6,000 crore to exporters in the current fiscal to help cushion them from the impact of the rising value of the rupee. If the domestic currency continues to rise, it is feared that the export sector, which accounts for around 15% of GDP, could see over eight million job losses by the end of the fiscal.

In addition, the cumulative revenues losses for companies, estimated to be Rs 25,000 crore so far, is expected to touch Rs 35,000 crore by March. The Indian currency has appreciated by as much as 12% since last January vis-?-vis the dollar.

In recent months, the finance ministry has provided service tax exemption to ten services as part of a relief package to exporters. However, exporters and the commerce ministry have demanded refund for 12 more services, including commission to foreign agents, fees for export warehouses, inland haulage charges from factory to inland container depots and ports, shipping & clearing agent charges, payments for courier, insurance & banking and communication expenses.

The commerce and finance ministries have been discussing the issue of service tax refund to exporters for over six months now, ever since the government announced service tax refund on all export related services in its annual supplement to the Foreign Trade Policy.