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More tax sops on export services

The Government exempts exporters from paying tax on services rendered by transport agencies, rail containers and courier services, reports Gaurav Choudhury.

business Updated: Feb 19, 2008 22:31 IST
Gaurav Choudhury

The government on Tuesday exempted exporters from paying tax on services rendered by transport agencies, rail containers and courier services.

“The government has decided to refund service tax paid by exporters on three taxable services that are not in the nature of "input services" but could be linked to export goods”, a finance ministry statement said.

At present, tax refunds are available on 10 services including ports, general insurance, business exhibitions, storage and warehousing, and inspection and certification.

The move may come as a relief to a export industry that has facing a big income squeezes as a result of the strengthening rupee.

The revenue implications of tax refund on the new set of services, however, were not known.

Service tax paid by exporters on input services used for export goods is refunded under the existing schemes. Drawback scheme also factors service tax paid on input services used for export goods.

The government imposes 12 per cent service tax along with 3 per cent education cess on services.

The rupee has surged in value against the dollar by over 12 per cent in 2007.

Stung by a rising rupee, the government had announced a series of fiscal and monetary relief measures during the last few months. In July, the government had announced a Rs 1,400-crore package that included cheaper bank credit, increased rate of tax refunds and faster reimbursement claims. This was followed by another package in October and exporters were exempted from paying tax on services rendered by ports, road transport and railways.

In November the government cut import duties on textile fibres and offered greater interest subsidy to the exporters struggling against an adverse currency market. The government had also announced concessional credit by banks for small and medium exporters and those enterprises exporting textiles, ready made garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys.

The government has set a $160-billion export target for 2007-08.

The textile industry, one of the largest employers in the organised sector, and the handicraft sector has been the hardest hit registering cumulative negative growth since April this year. Handicrafts exports, in which thousands of small and exporters are engaged, is another major sector affected by the rupee’s rising march.