Financial Daily from THE HINDU group of publications
Saturday, Nov 22, 2003
Financial Daily from THE HINDU group of publications Saturday, Nov 22, 2003 |
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Forex Government - Financial Policy Money & Banking - Forex Industry & Economy - Taxation Payments in foreign exchange — Tax exemption on travel-related services restored K.R. Srivats
New Delhi, Nov. 21 THE Centre has restored service tax exemption on certain services for which payments are received in India in convertible foreign exchange. Services such as those provided by a tour operator to anyone in relation to a tour, or to a customer by an air travel agent in relation to booking of air travel will now qualify for exemption. The Revenue Department has, however, stipulated that the exemption would not be available if the payment received in India in convertible foreign exchange is repatriated from or sent outside the country. The Government had withdrawn the exemption through the Finance Bill 2003. A Revenue Department official confirmed the restoration, adding that concerns persisted even as the Department had clarified that service tax would not be applicable on export of services. Sources indicated that the restoration of exemption may be only temporary till the "grey areas" in export of services are sorted out and comprehensive guidelines are issued by the Central Board of Excise and Customs (CBEC) on what constitutes export of services. In the initial months after the Budget, the Union Government had rejected the industry plea for restoration of such an exemption. It was then pointed out that such a move would strengthen the case for other constituencies like exporters, who are demanding 100 per cent tax exemption on export profits. After the 2003-04 Budget (when the April 1999 notification was withdrawn), service tax was applicable on all taxable services consumed or rendered in the country - irrespective of whether payment was received in foreign exchange or not. Following a representation from the IT-enabled services industry, the Finance Ministry had then clarified that service tax would not be applicable on call centres and medical transcription centres.
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