Stricter norms for availing benefits on exports

The finance ministry has tightened the norms for service providers who want to avail of the benefits of export of services.

Interior decorators, architects, general insurers, chartered accountants, marketing research agencies and other service providers will now be required to fulfill the twin criteria of services delivered and used outside India, and payment for services in convertible foreign exchange.

"These criteria are specifically incorporated also for taxable services, which are performed in relation to immovable property and where the actual performance is relevant," the finance ministry said.

According to Anita Rastogi, manager at PricewaterhouseCoopers, the inclusion of the words, "outside India and used outside India", makes availing of the benefits of export of services more stringent.

The benefits include exemption from service tax and a rebate on the tax on inputs.

JK Mittal, co-chairman of Assocham's indirect tax committee, said the requirement of payment in foreign exchange was a "sufficient" clause. Tax experts also appeared disappointed with the fact that there was no dilution of the definition of the import of services for the purposes of levying service tax.

"While the government has exempted individuals from service tax on services received and consumed abroad, the services consumed for commercial and business purposes will continue to attract the tax," said Mittal.