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| Cabinet secy calls meet to ease exporters' service tax woes |
| BS Reporter / New Delhi May 03, 2009, 00:31 IST |
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Cabinet Secretary KM Chandrasekhar has called a meeting of commerce and finance ministry officials to discuss the delays in reimbursement of service tax to exporters. The move was undertaken after a recent review of the fiscal stimulus packages by Chandrasekhar revealed that a majority of exporters were not getting the reimbursement. The meeting is likely next week.The Federation of Indian Export Organisations (FIEO) is compiling data on applications for service tax reimbursements that have either been rejected or are pending.
A recent evaluation exercise revealed that in the Jodhpur region of Rajasthan, about 250 applications were rejected between January-March this year.
Exporters pay indirect tax on various services taken while manufacturing or shipping goods for overseas sales. On an average, the amount comes to 5-6 per cent of the cost of the consignment. Indian exports have been on a downward curve since October 2008 as demand from key overseas markets like the United States and the European Union has dried up due to the global financial crisis.
Service tax exemption for exporters was announced in April 2007, but the relevant notification was issued only in October of that year. Since then, about 20 services have been notified on which exporters can claim refund.
According to exporters, the procedures for getting the refund are complicated. Moreover, even if the norms are followed, it becomes difficult for exporters to prove the link between the service tax paid and the consignment.
For example, one of the issues is related to the period within which the refund claim has to be filed, which according to the rules is within 90 days of the shipment. But exporters say that overseas clients are asking for credit of up to 180 days.
As a result, exporters pay their foreign agents and the required service tax associated with it only after the payment for the consignment is received, which is later than 90 days.
“It seems the government wants us to pay the tax and not refund it. Or it wants us to pay the service tax before we receive payments. We are impacted both ways,” said Rakesh Shah of Kolkata-based Nipha Enterprise, an exporter of agricultural machinery.
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