The government on Tuesday exempted exporters from paying tax on services provided by custom house agents, banking and other financial services in relation to collection of export bills and export letters of credit and foreign commission agents.
“The government has decided to refund the service tax paid by exporters on three taxable services, which are not in the nature of "input services" but could be linked to export goods,” a finance ministry statement said.
At present, refunds on taxable services are available to 13 services, including port, general insurance, business exhibition, storage and warehousing and inspection and certification agency services.
The move may come as a relief to beleaguered exporters who have seen a significant income squeeze because of the strengthening rupee, which gained 12 per cent on the dollar in 2007.
Service tax paid by exporters on input services used for export goods is refunded under existing schemes. The government imposes a 12 per cent service tax along with a 3 per cent education cess on services.
The government has set a $160 billion export target for 2007-08. Exports grew by a robust 35.35 per cent in February this year to reach $138.42 billion during the 11 months of the 2007-08.
The trade deficit, however, widened to $72.46 billion from $49.32 billion a year ago, latest official trade data showed.
Imports in February grew by 30.53 per cent and were valued at $210.89 billion during the 11 months of the current financial year.