Garments exporter disappointed with Service Tax
Garments exporters Association president sates,
“Garments Exporters are disappointed, with the Notification No.41/2007 Service Tax dated 6th October, 2007 of the Ministry of Finance, Department of Revenue, providing refund of Service Tax paid by exporters on services provided by an Insurer, Technical Testing and Analysis Agency, Inspection and Certification Agency.
The Notification No.40/2007 Service Tax dated 17th September, 2007 of the Ministry of Finance, had earlier provided refund of Service Tax paid by exporters on Port Services provided for export, services of transport of export goods by road from ICD to port of export by Goods Transport Agency and services of transport of export goods in containers by rail from ICD to port of export.
However, the refund has not been provided on a number of other important services on which Service Tax is being paid by exporters but they are still outside the preview of the Notifications, only limited relief to the exporters. The relief is limited to few services and therefore, very much short of our expectations as well as recommendations earlier announced by the Ministry of Commerce. It also does not neutralize the adverse impact of sharp appreciation in the value of rupee of over 11 percent which has seriously eroded the profitability of exporters.
The Government's policy has been not to export taxes and duties but only goods and services. Charging Service Tax on exports leads to export of taxes which should be exempted in full.The Commerce Ministry has been advocating neutralizing the entire Service Tax paid by the exporters. The Government should therefore, provide complete exemption to exporters from payment of service tax on all services including banking charges, couriers services, commission to foreign agents, foreign traveling expenses and participating in overseas trade fairs, charges to CHA's and Advertising Service charges, etc.
GEA would therefore again request the Government to exempt exporters from the payment of Service Tax on all export related services so that exporters need not pay the Service Tax and then claim refund so as to avoid unnecessary paper work and procedural delays in availing the benefit.
The Government may find certain technical hitches in granting the exemption to Exporters as requested above so it is highly recommended by the GEA that the service tax should be factored into the drawback claims made by exporters and the drawback rates should be increased by 5%.
This would eliminate unnecessary paper work and enable the exporters to concentrate on using their energies to compete with our neighbouring countries like China, Pakistan, Bangladesh etc. who have not been affected by appreciation of their currencies and hence are eating into our orders from foreign buyers with a cascading effect of reducing employment in our factories.”