The finance ministry has objected to one of the demands of exporters for tax refund on commission to foreign agents citing money laundering concern.
In a recent meeting, even the RBI had given its consent to the inclusion of commission to foreign agents in the list of services for which exporters would be given a refund of taxes paid on those services, official sources said. But the finance ministry raised objections, saying it was apprehensive about money laundering.
Exporters say this tax will hurt their businesses, since they cannot do without the agents who get them major foreign buyers. They had even agreed to the finance ministry?s demand to provide agreements of the commission with the foreign agent, commission payment bills, documents of remittances, but even after prolonged discussions, finance ministry officials were not convinced.
Foreign-based agents charge 1% commission on the value of the export order. With exports touching $125 billion last fiscal, back of the envelope calculations show the impost on the taxable income of $1.2 billion works out to around $144 million.