Delhi HC to examine validity of Rule regarding 'export of services'
WE are informed by the Advocate concerned:-
Yesterday (3rd September 2013), the Division Bench of Delhi High Court, comprising of Chief Justice N.V. Ramana and Justice Pradeep Nandrajog has issued notice to the Government of India through Ministry of Finance as well as Ministry of Commerce and Industry in a writ petition, inter alia challenging the validity of Rule framed for "export of services", which came into force with effect from 1 st July 2012 for seeking their response by giving four weeks' time and fixed up the next date of hearing on 24th of October 2013.
The writ petition has been filed by Indian Association of Tour Operators. The Association earlier approached the Ministry of Finance seeking the benefit of export of service to the "tour operators" engaged in providing services to the foreign nationals against convertible foreign exchange, as it has huge potential to our foreign exchange for India and also it plays pivotal role in employment generation in India. ASSOCHAM had also made a representation to the Ministry of Commerce and Industry regarding the "export of services" highlighting that there is no clarity in the principle of defining "export of services" in India, which is leading to lot of problems and litigations and also highlighted that tour operators who provide services to the foreign tourist and earn huge foreign exchange are not being treated as exporters of services. The petitioner has stated that there was no response for the representation made to the Government of India.
The Rule 6A of Service Tax Rules, 1994 has been framed to define "export of services", which goes beyond the rule making powers as the said rule only applies to non-taxable service i.e. where the place of provision of services is outside India. The Association in their writ petition has stated that the same services prior to 1st July 2012 were treated "export of services" and were not taxable, but become taxable with effect from 1st July 2012 due to change of Rules, even if the services are provided against the convertible foreign exchange to the foreign nationals for operating package tour in India and neighbouring country, thus, it makes Indian tour operators non-competitive. The Association has stated in the writ petition that the Rule framed by the Ministry of Finance regarding "export of services" is also against the Foreign Trade Policy (FTP) framed by the Ministry of Commerce and Industry, which states that if consideration is received in free foreign exchange by a tour operator, it would be considered as service exports.