Along with the duty sops announced as part of finance minister Pranab Mukherjee?s reply to the debate on the interim Budget on Tuesday, exporters have another reason to cheer.

The Central Board of Excise and Customs on Tuesday came out with the much-awaited clarification on export of services.

The CBEC has clarified that the meaning of the term ?used outside India? should be taken in the context of the nature of the service and has classified such services into three categories.

Services such as those of architects and general insurance would be deemed as export if they are in relation to immovable property. For services where the place of performance of the export can be established, like in the case of market research agencies and storage and warehousing, the CBEC has clarified that such services would be considered as ?exports? even if they were partly performed outside the country. Lastly, for knowledge- and technique-based services, the CBEC has said if they were provided in relation to business or commerce to recipients outside the country, they would be considered as exports.

The clarification will help speed up the process of service tax refunds for exporters which were delayed because of the ambiguity over the term. In fact, many call centres, medical transcripters, and marketing agents of foreign companies were being denied the export benefits.

Meanwhile, exporters on Tuesday welcomed the 2% cut in service tax and the extension of central excise duty reduction, saying it would help them price their products more competitively in markets abroad. However, pointing out that they were yet to get service tax refund claims worth over Rs 4,000 crore from the government, exporters demanded that they should totally be exempted from service tax.

?Majority of the exporters are still awaiting the refunds for over a year,? said A Sakthivel, president, Federation of Indian Export Organisations (FIEO), the apex body for exporters. He added the government should make the announcement of exempting exporters from service tax in the interim foreign trade policy to be announced on Thursday. He said the authorities have so far refunded only around 5% of the total claims on service tax refunds.

Welcoming the Centre?s decision to cut service tax from 12% to 10%, continue the 4% reduction in central excise duty beyond March, 31, 2009 and prune central excise duty on cement from 10% to 8%, Sakthivel said these measures will help boost domestic economy though on a limited basis. He said reduction in service tax rates would add to export competitiveness by about 0.25%.

According to CBEC, the total revenue outgo due to the cut in service tax is around Rs 14,000 crore.

The government had earlier increased the refund rate of service tax from 2% to 10% of Freight On Board (FOB) value of exports. With service tax being reduced from 12% to 10%, all exporters can now look forward to total refund of service tax on services like commission paid to the agents situated abroad for getting orders. However, Sakthivel said the procedure for refund of service tax is very complicated and therefore only a few exporters have got refunds so far.

•Services such as those of architects and general insurance would be deemed as export if they are in relation to immovable property

• Services where the place of performance of the export can be established, like in the case of market research agencies and storage and warehousing, would be considered as ?exports? even if they were partly performed outside India

• Lastly, for knowledge- and technique-based services, the CBEC has said if they were provided in relation to business or commerce to recipients outside the country, they would be considered as exports

• Service tax refunds for exporters were getting delayed because of the ambiguity over the term. In fact, many call centres, medical transcripters, and marketing agents of foreign companies were being denied the export benefits