Exemption from Service Tax - No clash with Commerce ministry – Finance Ministry
The Finance Ministry in a press release clarifies that it has no difference of opinion with the Commerce ministry on Service Tax exemption. The release states,
“The Annual supplement to the Foreign Trade Policy released in April, 2007 had stated that service tax on exports shall be exempted. Various newspapers have been reporting that differences persist between the Finance and Commerce ministries on this issue.”
TIOL was the only one to point out that it was not for the Commerce Minister to grant exemption from Service Tax, while every newspaper and news channel shouted hoarsely that KamalNath has exempted Service Tax. In fact the reporter of a leading TV channel called us up and wanted to know what the issue was. He had talked to the Commerce Secretary and the CBEC Chairman and was still confused as to what the whole issue was all about. We told him that KamalNath exempting Service Tax was like Chidambaram reducing Railway fares. He understood.
The Finance Ministry clarification continues,
The taxes paid on inputs or input services used for manufacture of export goods or for providing export services are already being neutralized under rebate, refund and drawback schemes. However modalities for refund/rebate service tax on certain services, which are not input services, but are related to goods or services exported from India, and to neutralize service tax on services received/rendered abroad are being worked out in consultation with the Department of Commerce.
This is exactly what we said. Until the Finance Ministry issues its notifications, whatever the Commerce Minister says is only wishful thinking. Of course the Government is expected to speak with one voice, but that rarely happens.